10 Big Findings from the 2023 IPCC Report on Climate Change

20 March 2023 | Today marks the release of the final installment of the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6), an eight-year long undertaking from the world’s most authoritative scientific body on climate change. Drawing on the findings of 234 scientists on the physical science of climate change, 270 scientists on impacts, adaptation and vulnerability to climate change, and 278 scientists on climate change mitigation, this IPCC synthesis report provides the most comprehensive, best available scientific assessment of climate change.

This article first appeared on the World Resources Institute (WRI) Insights Blog

It also makes for grim reading. Across nearly 8,000 pages, the AR6 details the devastating consequences of rising greenhouse gas (GHG) emissions around the world — the destruction of homes, the loss of livelihoods and the fragmentation of communities, for example — as well as the increasingly dangerous and irreversible risks should we fail to change course.

But the IPCC also offers hope, highlighting pathways to avoid these intensifying risks. It identifies readily available, and in some cases, highly cost-effective, actions that can be undertaken now to reduce GHG emissions, scale up carbon removal and build resilience. While the window to address the climate crisis is rapidly closing, the IPCC affirms that we can still secure a safe, livable future.

Here are 10 key findings you need to know:

1. Human-induced global warming of 1.1 degrees C has spurred changes to the Earth’s climate that are unprecedented in recent human history.

Already, with 1.1 degrees C (2 degrees F) of global temperature rise, changes to the climate system that are unparalleled over centuries to millennia are now occurring in every region of the world, from rising sea levels to more extreme weather events to rapidly disappearing sea ice.

Additional warming will increase the magnitude of these changes. Every 0.5 degree C (0.9 degrees F) of global temperature rise, for example, will cause clearly discernible increases in the frequency and severity of heat extremes, heavy rainfall events and regional droughts. Similarly, heatwaves that, on average, arose once every 10 years in a climate with little human influence will likely occur 4.1 times more frequently with 1.5 degrees C (2.7 degrees F) of warming, 5.6 times with 2 degrees C (3.6 degrees F), and 9.4 times with 4 degrees C (7.2 degrees F) — and the intensity of these heatwaves will also increase by 1.9 degrees C (3.4 degrees F), 2.6 degrees C (4.7 degrees F), and 5.1 degrees C (9.2 degrees F) respectively.

Rising global temperatures also heighten the probability of reaching dangerous tipping points in the climate system that, once crossed, can trigger self-amplifying feedbacks that further increase global warming, such as thawing permafrost or massive forest dieback. Setting such reinforcing feedbacks in motion can also lead to other substantial, abrupt and irreversible changes to the climate system. Should warming reach between 2 degrees C (3.6 degrees F) and 3 degrees C (5.4 degrees F), for example, the West Antarctic and Greenland ice sheets could melt almost completely and irreversibly over many thousands of years, causing sea levels to rise by several meters.

2. Climate impacts on people and ecosystems are more widespread and severe than expected, and future risks will escalate rapidly with every fraction of a degree of warming.

Described as an “an atlas of human suffering and a damning indictment of failed climate leadership” by United Nations Secretary-General António Guterres, one of AR6’s most alarming conclusions is that adverse climate impacts are already more far-reaching and extreme than anticipated. About half of the global population currently contends with severe water scarcity for at least one month per year, while higher temperatures are enabling the spread of vector-borne diseases, such as malaria, West Nile virus, and Lyme disease. Climate change has also slowed improvements in agricultural productivity in middle and low latitudes, with crop productivity growth shrinking by a third in Africa since 1961. And since 2008, extreme floods and storms have forced over 20 million people from their homes every year.

Every fraction of a degree of warming will intensify these threats, and even limiting global temperature rise to 1.5 degree C is not safe for all. At this level of warming, for example, 950 million people across the world’s drylands will experience water stress, heat stress and desertification, while the share of the global population exposed to flooding will rise by 24%.

Similarly, overshooting 1.5 degrees C (2.7 degrees F), even temporarily, will lead to much more severe, oftentimes irreversible impacts, from local species extinctions to the complete drowning of salt marshes to loss of human lives from increased heat stress. Limiting the magnitude and duration of overshooting 1.5 degrees C (2.7 degrees F), then, will prove critical in ensuring a safe, livable future, as will holding warming to as close to 1.5 degrees C (2.7 degrees F) or below as possible. Even if this temperature limit is exceeded by the end of the century, the imperative to rapidly curb GHG emissions to avoid higher levels of warming and associated impacts remains unchanged.

3. Adaptation measures can effectively build resilience, but more finance is needed to scale solutions.

Climate policies in at least 170 countries now consider adaptation, but in many nations, these efforts have yet to progress from planning to implementation. Measures to build resilience are still largely small-scale, reactive and incremental, with most focusing on immediate impacts or near-term risks. This disparity between today’s levels of adaptation and those required persists in large part due to limited finance. According to the IPCC, developing countries alone will need $127 billion per year by 2030 and $295 billion per year by 2050 to adapt to climate change. But funds for adaptation reached just $23 billion to $46 billion from 2017 to 2018, accounting for only 4% to 8% of tracked climate finance.

The good news is that the IPCC finds that, with sufficient support, proven and readily available adaptation solutions can build resilience to climate risks and, in many cases, simultaneously deliver broader sustainable development benefits.

Ecosystem-based adaptation, for example, can help communities adapt to impacts that are already devastating their lives and livelihoods, while also safeguarding biodiversity, improving health outcomes, bolstering food security, delivering economic benefits and enhancing carbon sequestration. Many ecosystem-based adaptation measures — including the protection, restoration and sustainable management of ecosystems, as well as more sustainable agricultural practices like integrating trees into farmlands and increasing crop diversity — can be implemented at relatively low costs today. Meaningful collaboration with Indigenous Peoples and local communities is critical to the success of this approach, as is ensuring that ecosystem-based adaptation strategies are designed to account for how future global temperature rise will impact ecosystems.

4. Some climate impacts are already so severe they cannot be adapted to, leading to losses and damage.

Around the world, highly vulnerable people and ecosystems are already struggling to adapt to climate change impacts. For some, these limits are “soft” — effective adaptation measures exist, but economic, political and social obstacles constrain implementation, such as lack of technical support or inadequate funding that does not reach the communities where it’s needed most. But in other regions, people and ecosystems already face or are fast approaching “hard” limits to adaptation, where climate impacts from 1.1 degrees C (2 degrees F) of global warming are becoming so frequent and severe that no existing adaptation strategies can fully avoid losses and damages. Coastal communities in the tropics, for example, have seen entire coral reef systems that once supported their livelihoods and food security experience widespread mortality, while rising sea levels have forced other low-lying neighborhoods to move to higher ground and abandon cultural sites.

Whether grappling with soft or hard limits to adaptation, the result for vulnerable communities is oftentimes irreversible and devastating. Such losses and damages will only escalate as the world warms. Beyond 1.5 degrees C (2.7 degrees F) of global temperature rise, for example, regions reliant on snow and glacial melt will likely experience water shortages to which they cannot adapt. At 2 degrees C (3.6 degrees F), the risk of concurrent maize production failures across important growing regions will rise dramatically. And above 3 degrees C (5.4 degrees F), dangerously high summertime heat will threaten the health of communities in parts of southern Europe.

Urgent action is needed to avert, minimize and address these losses and damages. At COP27, countries took a critical step forward by agreeing to establish funding arrangements for loss and damage, including a dedicated fund. While this represents a historic breakthrough in the climate negotiations, countries must now figure out the details of what these funding arrangements, as well as the new fund, will look like in practice — and it’s these details that will ultimately determine the adequacy, accessibility, additionality and predictability of these financial flows to those experiencing loss and damage.

5. Global GHG emissions peak before 2025 in 1.5 degrees C-aligned pathways.

The IPCC finds that there is a more than 50% chance that global temperature rise will reach or surpass 1.5 degrees C (2.7 degrees F) between 2021 and 2040 across studied scenarios, and under a high-emissions pathway, specifically, the world may hit this threshold even sooner — between 2018 and 2037. Global temperature rise in such a carbon-intensive scenario could also increase to 3.3 degrees C to 5.7 degrees C (5.9 degrees F to 10.3 degrees F) by 2100. To put this projected amount of warming into perspective, the last time global temperatures exceeded 2.5 degrees C (4.5 degrees F) above pre-industrial levels was more than 3 million years ago.

Changing course to limit global warming to 1.5 degrees C (2.7 degrees F) — with no or limited overshoot — will instead require deep GHG emissions reductions in the near-term. In modelled pathways that limit global warming to this goal, GHG emissions peak immediately and before 2025 at the latest. They then drop rapidly, declining 43% by 2030 and 60% by 2035, relative to 2019 levels.

While there are some bright spots — the annual growth rate of GHG emissions slowed from an average of 2.1% per year between 2000 and 2009 to 1.3% per year between 2010 and 2019, for example — global progress in mitigating climate change remains woefully off track. GHG emissions have climbed steadily over the past decade, reaching 59 gigatonnes of carbon dioxide equivalent (GtCO2e) in 2019 — approximately 12% higher than in 2010 and 54% greater than in 1990.

Even if countries achieved their climate pledges (also known as nationally determined contributions or NDCs), WRI research finds that they would reduce GHG emissions by just 7% from 2019 levels by 2030, in contrast to the 43% associated with limiting temperature rise to 1.5 degrees C (2.7 degrees F). And while handful of countries have submitted new or enhanced NDCs since the IPCC’s cut-off date, more recent analysis that takes these submissions into account finds that these commitments collectively still fall short of closing this emissions gap.

6. The world must rapidly shift away from burning fossil fuels — the number one cause of the climate crisis.

In pathways limiting warming to 1.5 degrees C (2.7 degrees F)with no or limited overshoot just a net 510 GtCO2 can be emitted before carbon dioxide emissions reach net zero in the early 2050s. Yet future carbon dioxide emissions from existing and planned fossil fuel infrastructure alone could surpass that limit by 340 GtCO2, reaching 850 GtCO2.

A mix of strategies can help avoid locking in these emissions, including retiring existing fossil fuel infrastructure, canceling new projects, retrofitting fossil-fueled power plants with carbon capture and storage (CCS) technologies and scaling up renewable energy sources like solar and wind (which are now cheaper than fossil fuels in many regions).

In pathways that limit warming to 1.5 degrees C (2.7 degrees F) — with no or limited overshoot — for example, global use of coal falls by 95% by 2050, oil declines by about 60% and gas by about 45%. These figures assume significant use of abatement technologies like CCS, and without them, these same pathways show much steeper declines by mid-century. Global use of coal without CCS, for example, is virtually phased out by 2050.

Although coal-fired power plants are starting to be retired across Europe and the United States, some multilateral development banks continue to invest in new coal capacity. Failure to change course risks stranding assets worth trillions of dollars.

7. We also need urgent, systemwide transformations to secure a net-zero, climate-resilient future.

While rapidly reducing GHG emissions from fossil fuels will prove critical in combatting the climate crisis, these cuts must be accompanied by efforts to accelerate transformational changes across power generation, buildings, industry, transport, and agriculture, forestry and other land uses.

The use of coal without CCS in modelled pathways that limit warming to 1.5°C (with no or limited overshoot) is projected to be reduced by a median value of about 100%, with the full range being 95% to 100%.

Take the transport system, for instance. Drastically cutting emissions will require urban planning that minimizes the need for travel, as well as the build-out of shared, public, and nonmotorized transport, such as rapid transit and bicycling in cities. Such a transformation will also entail increasing the supply of electric passenger vehicles, commercial vehicles, and buses, coupled with wide-scale installation of rapid-charging infrastructure, investments in zero-carbon fuels for shipping and aviation, and more.

Policy measures that make these changes less disruptive can help accelerate needed transitions, such as subsidizing zero-carbon technologies and taxing high-emissions technologies like fossil-fueled cars. Infrastructure design — like reallocating street space for sidewalks or bike lanes — can help people transition to lower-emissions lifestyles. It is important to note there are many co-benefits that accompany these transformations, too. Minimizing the number of passenger vehicles on the road, in this example, reduces harmful local air pollution and cuts traffic-related crashes and deaths.

Transformative adaptation measures, too, are critical for securing a more prosperous future. The IPCC emphasizes the importance of ensuring that adaptation measures drive systemic change, cut across sectors, and are distributed equitably across at-risk regions. The good news is that there are oftentimes strong synergies between transformational mitigation and adaptation. For example, in the global food system, climate-smart agriculture practices like shifting to agroforestry can improve resilience to climate impacts, while simultaneously advancing mitigation.

8. Carbon removal is now essential to limit global temperature rise to 1.5 degrees C.

Deep decarbonization across all systems while building resilience won’t be enough to achieve global climate goals, though. The IPCC finds that all pathways that limit warming to 1.5 degrees C (2.7 degrees F) — with no or limited overshoot — depend on some quantity of carbon removal. These approaches encompass both natural solutions, such as sequestering and storing carbon in trees and soil, as well as more nascent technologies that pull carbon dioxide directly from the air.

The amount of carbon removal required depends on how quickly we reduce GHG emissions across other systems, and the extent to which climate targets are overshot, with estimates ranging from between 5 GtCO2 to 16 GtCO2 per year needed by mid-century.

All carbon removal approaches have merits and drawbacks. Reforestation, for instance, represents a readily available, relatively low-cost strategy that, when implemented appropriately, can deliver a wide range of benefits to communities. Yet the carbon stored within these ecosystems is also vulnerable to disturbances like wildfires, which may increase in frequency and severity with additional warming. And, while technologies like bioenergy with carbon capture and storage (BECCS) may offer a more permanent solution, such approaches also risk displacing croplands, and in doing so, threatening food security. Responsibly researching, developing and deploying emerging carbon removal technologies, alongside existing natural approaches, will therefore require careful understanding of each solution’s unique benefits, costs and risks.

9. Climate finance for both mitigation and adaptation must increase dramatically this decade.

The IPCC finds that public and private finance flows for fossil fuels today far surpass those directed toward climate mitigation and adaptation. Thus, while annual public and private climate finance has risen by upwards of 60% since the IPCC’s Fifth Assessment Report, much more is still required to achieve global climate change goals. For instance, climate finance will need to increase between 3 and 6 times by 2030 to achieve mitigation goals, alone.

This gap is widest in developing countries, particularly those already struggling with debt, poor credit ratings and economic burdens from the COVID-19 pandemic. Recent mitigation investments, for example, need to increase by at least sixfold in Southeast Asia and developing countries in the Pacific, fivefold in Africa and fourteenfold in the Middle East by 2030 to hold warming below 2 degrees C (3.6 degrees F). And across sectors, this shortfall is most pronounced for agriculture, forestry and other land use, where recent financial flows are 10 to 31 times below what is required to achieve the Paris Agreement’s goals.

Finance for adaptation, as well as loss and damage, will also need to rise dramatically. Developing countries, for example, will need $127 billion per year by 2030 and $295 billion per year by 2050. While AR6 does not assess countries’ needs for finance to avert, minimize and address losses and damages, recent estimates suggest that they will be substantial in the coming decades. Current funds for both fall well below estimated needs, with the highest estimates of adaptation finance totaling under $50 billion per year.

10. Climate change — as well as our collective efforts to adapt to and mitigate it — will exacerbate inequity should we fail to ensure a just transition.  

Households with incomes in the top 10%, including a relatively large share in developed countries, emit upwards of 45% of the world’s GHGs, while those families earning in the bottom 50% account for 15% at most. Yet the effects of climate change already — and will continue to — hit poorer, historically marginalized communities the hardest.

Today, between 3.3 billion and 3.6 billion people live in countries that are highly vulnerable to climate impacts, with global hotspots concentrated in the Arctic, Central and South America, Small Island Developing states, South Asia, and much of sub-Saharan Africa. Across many countries in these regions, conflict, existing inequalities and development challenges (e.g., poverty and limited access to basic services like clean water) not only heighten sensitivity to climate hazards, but also limit communities’ capacity to adapt.  Mortality from storms, floods and droughts, for instance, was 15 times higher in countries with high vulnerability to climate change than in those with very low vulnerability from 2010 to 2020.

At the same time, efforts to mitigate climate change also risk disruptive changes and exacerbating inequity. Retiring coal-fired power plants, for instance, may displace workers, harm local economies and reconfigure the social fabric of communities, while inappropriately implemented efforts to halt deforestation could heighten poverty and intensify food insecurity. And certain climate policies, such as carbon taxes that raise the cost of emissions-intensive goods like gasoline, can also prove to be regressive, absent of efforts to recycle the revenues raised from these taxes back into programs that benefit low-income communities.

Fortunately, the IPCC identifies a range of measures that can support a just transition and help ensure that no one is left behind as the world moves toward a net-zero-emissions, climate-resilient future. Reconfiguring social protection programs (e.g., cash transfers, public works programs and social safety nets) to include adaptation, for example, can reduce communities’ vulnerability to a wide range of future climate impacts, while strengthening justice and equity. Such programs are particularly effective when paired with efforts to expand access to infrastructure and basic services.

Similarly, policymakers can design mitigation strategies to better distribute the costs and benefits of reducing GHG emissions. Governments can pair efforts to phase out coal-fired electricity generation, for instance, with subsidized job retraining programs that support workers in developing the skills needed to secure new, high-quality jobs. Or, in another example, officials can couple policy interventions dedicated to expanding access to public transit with interventions to improve access to nearby, affordable housing.

Across both mitigation and adaptation measures, inclusive, transparent and participatory decision-making processes will play a central role in ensuring a just transition. More specifically, these forums can help cultivate public trust, deepen public support for transformative climate action and avoid unintended consequences.

Looking Ahead

The IPCC’s AR6 makes clear that risks of inaction on climate are immense and the way ahead requires change at a scale not seen before. However, this report also serves as a reminder that we have never had more information about the gravity of the climate emergency and its cascading impacts — or about what needs to be done to reduce intensifying risks.

Limiting global temperature rise to 1.5 degrees C (2.7 degrees F) is still possible, but only if we act immediately. As the IPCC makes clear, the world needs to peak GHG emissions before 2025 at the very latest, nearly halve GHG emissions by 2030, and reach net-zero CO2 emissions around mid-century, while also ensuring a just and equitable transition. We’ll also need an all-hands-on-deck approach to guarantee that communities experiencing increasingly harmful impacts of the climate crisis have the resources they need to adapt to this new world. Governments, the private sector, civil society and individuals must all step up to keep the future we desire in sight. A narrow window of opportunity is still open, but there’s not one second to waste.

Evolving climate science, carbon accounting, and the need to support urgent action

Please note this article originally appeared in Carbon Pulse: https://carbon-pulse.com/193444/

15 March 2023 | We’ve come a long way since 1979, when leading scientists from around the world first formally warned that deforestation was a significant contributor to global climate change.

The interactions between human activities, terrestrial ecosystems, and the atmosphere are complex and dynamic, and it took a while before frameworks were in place to account the benefits of climate actions in the agriculture, forestry and other land use (AFOLU) sector. Some of the original guidance on project-based AFOLU activities was published by the IPCC in 2000.[1]

By 2010, the science had advanced enough to create financing mechanisms for “REDD,” which stands for “Reducing Emissions from Deforestation and forest Degradation.” Voluntary carbon market finance supporting REDD activities depends on effective forest conservation, and on appropriate and reliable tools for measuring and accounting the benefits of climate actions– called “carbon methodologies.”

Just as our understanding of climate science continues to advance, carbon methodologies likewise must not be static constructs, but rather must continue to evolve and improve in step with advancements in knowledge and technology. The development and refinement of carbon methodologies is a deliberate and ongoing process involving research, testing and critical evaluation, and draws on the contributions of researchers, practitioners, auditors and the standards that administer them. This process doesn’t involve replacing or invalidating established approaches, but instead building on and improving them over time.

Prior to the establishment of formal REDD methodologies, Sandra Brown, a leading pioneer in forest carbon science and mentor to many, led a team of researchers testing approaches to set REDD baselines in a wide range of landscapes. Their findings were published in 2007 in Mitigation and Adaptation Strategies for Global Change[2], and were later incorporated into some of the first REDD methodologies approved by the Verified Carbon Standard (VCS) in 2010.

While those first REDD methodologies reflected the best available science at the time, they did not represent an end point. Since then, the methodologies have been progressively refined as new science became available. As an example, an integral part of REDD baselines involves predicting deforestation risk at small scales (“risk mapping”). As predictive models continued to be improved, together with advancements in satellite sensors and classification techniques of land cover change, researchers at Clark University, led by Gil Pontius, published new findings and recommendations regarding how model goodness-of-fit should be evaluated[3]. These recommendations, and new metrics to evaluate model reliability, were subsequently incorporated into the methodologies as revisions, improving confidence in this aspect of baseline setting. The soon-to-be released consolidated REDD methodology developed under Verra’s VCS Program represents the latest step in this process to draw on the latest science to build on and strengthen methodologies.

This active interface with the latest science has led to important innovations making possible carbon accounting of new AFOLU activities. With The Nature Conservancy, TerraCarbon developed the first standardized method for baseline setting in the AFOLU sector in the VCS Reduced Impact Logging (VM0035[4]) methodology. The methodology, approved in 2015, was based on extensive research in East Kalimantan, Indonesia, led by Bronson Griscom and Peter Ellis, published in Global Change Biology in 2014[5]. Informed by new research initiatives, the geographic scope of the methodology has been expanded incrementally to include new forest landscapes, including the Yucatan peninsula of Mexico, Republic of Congo and Suriname (the last two in development).

More recently, TerraCarbon has led the introduction of new impact evaluation approaches to carbon methodologies, involving direct observations in matched controls to produce dynamic baselines. This work was preceded and informed by a research effort undertaken by TerraCarbon and colleagues from North Carolina State University, IMAZON and Duke University, piloting the application of the Synthetic Control Methodology (SCM) in Brazil, to evaluate the avoided deforestation impact of the Green Municipalities Program administered by the state of Para, and published by Erin Sills and her team in PloS ONE in 2015[6]. Dynamic approaches like SCM and nearest neighbor matching offer important improvements over baselines that rely on fixed historic assumptions. Because controls representing the baseline are observed ex post using dynamic approaches, and are subject to the same externalities like policy, markets and climate as the project, dynamic approaches have the potential to better resolve and attribute impacts back to the actions that produced them, the central aim of any carbon methodology. We have incorporated dynamic approaches in the American Carbon Registry’s Restoration of Pocosin Wetlands methodology[7] approved in 2017, in the VCS Methodology for Improved Forest Management (IFM) Using Dynamic Matched Baselines from National Forest Inventories (VM0045[8]), approved in 2022, and in the upcoming VCS Methodology for Afforestation, Reforestation and Revegetation (ARR) Projects.

Dynamic approaches like these deserve serious consideration more broadly in the AFOLU sector, and have the potential to make valuable contributions in accounting for REDD, that can build on or complement existing approaches. TerraCarbon maintains our commitment to support the work of Verra and other voluntary carbon standards in their continual effort to critically evaluate and improve carbon methodologies. New approaches, however, require testing to determine their appropriateness across varying circumstances, and to this end, TerraCarbon will be working with partners over the next year to pilot applications of dynamic baseline approaches in the context of REDD across a range of forest landscapes, evaluating the benefits they can offer. We plan to share the results publicly, and where they show promise we will solicit broader engagement on how they can be integrated into, and strengthen the integrity of, existing accounting frameworks, including emerging jurisdictional baselines.

Non-market approaches that rely on public and philanthropic funding have been insufficient to stem global deforestation and its contribution to climate change.  Market-based approaches, that are results-based and supported by sound accounting methods, are crucial to expanding and scaling finance from public and private sources to protect the world’s remaining forests. The ongoing need to evaluate and refine accounting methods, incorporating new data and new understanding, is not a fatal flaw in the market. Rather it is a natural and essential process that we will support so that market-based finance can be delivered more efficiently and urgently to fight climate change and conserve forests around the world.


Photo by Devon Ericksen


[1] Brown, S., Masera, O., & Sathaye, J. 2000. Project based activities. In R. T. Watson, I. R. Noble, B. Bolin, N. H. Ravin-dranath, D. J. Verardo, and D. J. Dokken (Eds.), Land use, land-use change and forestry: A Special report of the IPCC(pp. 283 – 338). Cambridge: Cambridge University Press

[2] Brown, S. et al. 2007. Baselines for land-use change in the tropics: application to avoided deforestation projects. Mitigation and Adaptation Strategies for Global Change, 12, pp.1001-1026.

[3] Pontius Jr, R. G. (2018). Criteria to Confirm Models that Simulate Deforestation and Carbon Disturbance. Land, 7(3), 14.

R G Pontius Jr, et al. 2008. Comparing input, output, and validation maps for several models of land change. Annals of Regional Science, 42(1): 11-47.

R G Pontius Jr et al. 2007. Accuracy assessment for a simulation model of Amazonian deforestation. Annals of Association of American Geographers, 97(4): 677-695.)

[4] https://verra.org/methodologies/vm0035-methodology-for-improved-forest-management-through-reduced-impact-logging-v1-0/

[5] Griscom, B., Ellis, P. and Putz, F.E., 2014. Carbon emissions performance of commercial logging in East Kalimantan, Indonesia. Global Change Biology, 20(3), pp.923-937.

[6] Sills, E.O., Herrera, D., Kirkpatrick, A.J., Brandão Jr, A., Dickson, R., Hall, S., Pattanayak, S., Shoch, D., Vedoveto, M., Young, L. and Pfaff, A., 2015. Estimating the impacts of local policy innovation: the synthetic control method applied to tropical deforestation. PloS one, 10(7), p.e0132590.

[7] https://americancarbonregistry.org/carbon-accounting/standards-methodologies/greenhouse-gas-benefits-of-pocosin-restoration

[8] https://verra.org/methodologies/methodology-for-improved-forest-management/

Ecosystem Marketplace and US Department of State to Assist Governments in Formulating Article 6 Carbon Markets Strategies

Ecosystem Marketplace, an initiative of the non-profit Forest Trends, has launched a new effort with support from the United States Department of State Office of Global Change to support developing country governments in considering how international carbon markets could enhance their national climate strategies.

Ecosystem Marketplace (EM) will provide information and capacity building to a pilot group of Paris Agreement Parties and participants in the International Civil Aviation Organization’s global market-based measure, CORSIA (short for “Carbon Offsetting and Reduction Scheme for International Aviation”). The project’s goal is to ensure national governments are well positioned to engage in carbon markets in the course of implementing their climate strategies, while enhancing investor confidence and the supply of carbon credits that meet key multilateral standards, including Paris Agreement and CORSIA rules.

The passage of guidance on Article 6 of the Paris Agreement at the 26th Conference of Parties (COP26) in Glasgow in late 2021 provided countries with the clarity needed to authorize domestic carbon credits for international use, for example under the CORSIA or toward Paris Agreement emissions reduction targets. National governments now face a new set of complex decisions around the option to authorize domestic emissions reductions under Article 6, because any emissions reductions that are transferred and used as authorized cannot count toward achieving the host country’s Nationally Determined Contribution (NDCs) under the Paris Agreement.

“Article 6 creates new flexibility for countries, but also new complexity,” said Stephen Donofrio, Managing Director of Ecosystem Marketplace. “As an independent and objective global system of carbon market information, we want to support rational, transparent, data-driven decision-making processes that fit the needs and priorities of host countries, enabling them and buyers to benefit while continually encouraging higher NDC ambition.”

“This represents an exciting new evolution for EM – from a leading source of publications on voluntary carbon markets into a leading data, analytics, reporting, services, and thought leadership provider for expanding global carbon credit markets,” said Donofrio.

“National decisions to authorize carbon credits for international use can unlock investments and resources that developing countries critically need in order to implement their national climate strategies,” said Molly Peters-Stanley, US State Department’s Lead Negotiator on International Carbon Markets.

“We are excited to work with this new EM initiative to equip those countries with robust recent data and training that can help them amplify the benefits of carbon markets while maintaining progress in their Paris Agreement implementation.”

The new EM initiative, with financial support from the Department of State’s climate change office, will provide developing country governments worldwide with access to a console of carbon pricing data and intelligence oriented to national decision-makers, as well as decision-support tools for Article 6 authorizations piloted by another Department of State assistance program, Offsetting National Emissions through Sustainable Landscapes (ONE-SL).

The new EM International Carbon Credits Console will capture data on carbon markets and results-based payments, including, e.g., their sustainable development benefits, monetary value, and trends in carbon credit demand for national and net-zero emissions targets and CORSIA. This will be a tailored platform to directly support governments, backed by broader upgrades to EM data platforms and trading reporting processes.

The three-year project  will also provide up to eight eligible developing countries with targeted technical assistance and training for government officials as they prepare their authorizations strategies and track authorizations.

“National governments will need access to best-in-class information and tools to evaluate the implications of decisions about which emissions reductions to authorize for international use, how to track those authorizations, and standardized approaches to communicating those decisions,” says Patrick Maguire, Senior Manager of Ecosystem Marketplace.

“We want to assist countries to make strategic, data-driven decisions, while ratcheting up NDC ambition. Well-functioning carbon markets are essential to achieving the Paris Agreement temperature goal and ensuring successful implementation of CORSIA,” says Maguire.


This announcement was funded by a grant from the United States Department of State. The opinions, findings and conclusions stated herein are those of the authors and do not necessarily reflect those of the United States Department of State.


Ecosystem Marketplace is an initiative of the non-profit organization Forest Trends, and a leading global source of information on environmental finance, markets, and payments for ecosystem services. As a web-based service, Ecosystem Marketplace publishes newsletters, breaking news, original feature articles, and annual reports about market-based approaches to valuing and financing ecosystem services. We believe that transparency is a hallmark of robust markets and that by providing accessible and trustworthy information on prices, regulation, science, and other market-relevant issues, we can contribute to market growth, catalyze new thinking, and spur the development of new markets and the policies and infrastructure needed to support them. Ecosystem Marketplace is financially supported by a diverse set of organizations including multilateral and bilateral government agencies, private foundations, and corporations involved in banking, investment, and various ecosystem services.

EM Strategic Supporter Feature
Navigating the carbon removals market: A guide for buyers


Lasting mitigation of carbon is critical for keeping emissions in line with the goals established in the Paris Agreement. Backed by the IPCC, Science Based Target Initiative, and the United Nations’ Race to Zero Campaign, carbon removals pose a huge opportunity to help meet the crucial 1.5 degree or less global warming trajectory. These initiatives mandate corporations’ use of carbon removal to address remaining emissions in their net zero target year and to contribute to global decarbonization on their path to net zero.

For the voluntary carbon markets to meet the growing demand for carbon removals, rapid progress must be made to expand the supply. The carbon removal market is nascent, however, and many unanswered questions exist around project-level criteria, methodologies, and scalability. New innovative pathways for removing and storing carbon are ever-emerging and standards bodies are still shaping methodologies for these types of projects.

With so little concrete guidance, how can organizations help support a thriving carbon removals market that will meet the demands of a net zero economy? A new white paper from EM Strategic Supporter 3Degrees, “Understanding the carbon removals landscape: Creating clarity in an opaque market”, starts to answer that question.

Download this resource to learn more about:

  • the current carbon removals market
  • possible carbon removal procurement pathways
  • key considerations and screening criteria for corporate carbon removal buyers
  • actions that scale up supply for carbon removals

Download the white paper here.

Companies Increase Ambition to Protect Biodiversity from Deforestation

30 January 2023 |Corporate interest in protecting biodiversity has accelerated considerably in the last five years, according to the latest Supply Change data.

Biodiversity is under serious threat from human activities like agriculture, pollution, and overexploitation. Because biodiversity underpins well-functioning ecosystems and provides essential services (“ecosystem services”) that human society relies on, such as crop pollination, rainfall patterns, soil fertility, and flood prevention, the loss of biodiversity is a serious threat to the global economy. Nonetheless, biodiversity has historically been a “silent crisis,” frequently overshadowed in political and corporate activities by comparatively serious threats like climate change.

However, the silent biodiversity crisis is starting to make some noise.

The United Nations’ Convention on Biological Diversity’s Fifteenth Conference of Parties’ (COP15) concluded on December 19 with governments striking a historic deal to protect thirty percent of Earth’s terrestrial and marine areas, restore thirty percent of degraded ecosystems, and reform environmentally harmful subsidies.

Companies, too, are increasingly acknowledging the role they play in driving biodiversity loss, and they are embarking on efforts to avoid, mitigate, minimize, and compensate for their negative impacts on biodiversity. Biodiversity loss and deforestation are closely linked issues; habitat loss is the most significant cause of species extinctions, and the conversion of tropical forests to produce forest-risk commodities, like cattle, palm oil, and soy, is the leading cause of terrestrial biodiversity loss globally. Addressing deforestation will be a crucial component of any larger biodiversity protection policy for companies that source and produce forest-risk commodities.

Over the past five years, Supply Change has observed an explosion in the number of companies aiming to protect biodiversity as part of their commitment to reduce or eliminate deforestation in their forest-risk commodity supply chains.[1] Data gathered in late 2021, featured in part one of Supply Change’s two-part report series published in 2022, show that over three-quarters (76 percent) of companies researched included a biodiversity protection statement in at least one commitment. 

This is a considerable jump from just five years ago. Supply Change data show that in 2018, only about half of these companies had biodiversity statements, and Supply Change’s 2017 annual report stated that only 37 percent of companies researched had a biodiversity statement.

Companies’ statements on protecting biodiversity are often general, but they occasionally provide specifics about the aspects of biodiversity they are most concerned with protecting and how they are implementing (or planning to implement) these protections, beyond preventing habitat destruction by tackling commodity-driven deforestation.

For example, out of 94 companies aspiring to protect biodiversity, about a third pledged to protect endangered species, and 18 percent pledged to avoid sourcing from or producing in protected or biodiversity priority areas. A handful of companies included language on protecting native ecosystems, providing funding or other support to conservation organizations, protecting ecosystem services, protecting intact landscapes, achieving net gain or no net loss of biodiversity, and reducing forest fragmentation.

The growing awareness of the seriousness and urgency of the risks from biodiversity loss to companies’ operations and profits may be the reason for this increase.

Biodiversity underpins natural systems, which provide ecosystem services that human society relies on. These services are often taken for granted, but are enormously valuable. They are worth roughly $130 trillion annually, which is more than 1.5 times the annual global GDP. Accordingly, the World Economic Forum has consistently ranked biodiversity loss among the top three biggest threats facing humanity in the next ten years, in terms of likelihood and severity of impact. Because they source agricultural and forestry products, the companies tracked by Supply Change are especially vulnerable to business impacts from biodiversity loss.

Lower yields in agricultural and forestry industries from degraded ecosystem services cause supply shortages, price fluctuations, and increased costs, both for companies directly producing agricultural and forestry commodities and companies that source these commodities to create products for end consumers. Companies may also have to contend with increasing costs from damaged transportation and other infrastructure from worsening natural disasters.

Consumer-facing (downstream) companies are especially vulnerable to reputational damage, often in the form of negative publicity from media and advocacy groups. Biodiversity loss is a powerful invoker of strong public sentiment; negative impacts to the cute and fuzzy faces of iconic species, like tigers or orangutans, tug on our collective heartstrings and can influence consumer and corporate customer buying practices. The human impact of companies’ activities on biodiversity may also undermine their efforts to protect human rights and wellbeing and invoke negative public sentiment; biodiversity loss is also detrimental for indigenous peoples and local communities, an issue that has received growing attention in recent years.

The growing threat of regulatory risk (e.g., increased costs of complying with government regulations related to biodiversity protection) and jeopardized access to investment capital may also be a motivating factor for companies to act on biodiversity. This enables them to identify and implement the most cost-effective strategy on their own timeline, before they are legally required to. The global agreement finalized at COP15 last month, for example, includes targets for companies to assess, monitor, and disclose the impacts of their operations and supply chains on biodiversity. Pressure to act may also come from other private sector actors, such as corporate customers and financial institutions with stricter biodiversity-related procurement or investment standards. For example, last month, a group of eleven investors launched a campaign called Nature Action 100, which will engage the 100 companies with the highest impact on nature to help them minimize their impacts and address biodiversity loss.

As companies increasingly broadcast their biodiversity protection intentions, various organizations have released tools and guidance documents to help companies measure and mitigate their impact on biodiversity. For example, in 2020, the Natural Capital Impact Group (a collaboration between the University of Cambridge’s Institute for Sustainability Leadership and several major corporations, including Kering, Mars, and Asda) released the Biodiversity Impact Metric guidance document, which provides guidance for companies on measuring biodiversity impacts and setting appropriate targets to reduce these impacts.

More guidance on measuring and managing biodiversity impacts is forthcoming. The Science-Based Targets Network (SBTN), which has been a major force in supporting the establishment of targets to reduce greenhouse gas emissions in companies’ operations and supply chains, is currently developing guidance for companies to set appropriate targets to reduce, eliminate, and even reverse biodiversity loss in their operations and supply chains. The SBTN’s guidance for measuring biodiversity impacts will likely be based on a combination of existing methodologies, such as the Species Threat Abatement and Restoration (STAR) metric and the land occupancy methodologies, designed to calculate baseline measurements and establish appropriate improvement targets that adhere to the mitigation hierarchy principles (i.e., avoiding and minimizing impacts on biodiversity are preferrable to restoring and offsetting biodiversity loss). Indicators will cover the connectivity and integrity of ecosystems, the percentage of species threatened with extinction, and the abundance of species.

But companies don’t have to wait for additional guidance on measuring and mitigating biodiversity impacts to make progress towards their biodiversity protection objectives. For many companies, especially those producing or sourcing forest-risk commodities, avoiding and minimizing habitat destruction in their operations and supply chains is guaranteed to be a major feature of any biodiversity protection strategy, and something that current and forthcoming guidance will undoubtedly flag as a high priority. Existing guidance, such as the Accountability Framework, which outlines best practices for establishing targets for deforestation and conversion-free supply chains, supply chain management, land management, and other deforestation-related policies and practices, can help companies get started on reducing biodiversity loss in their operations and supply chains.

Given the growing number and urgency of internal and external factors pushing companies to act to reduce their impacts on biodiversity, Supply Change expects that its ongoing and future research will continue to reveal even more companies taking steps to protect biodiversity, integrate biodiversity-specific targets with existing deforestation-focused strategies, and report additional implementation and impact information on their efforts to address biodiversity loss in their operations and supply chains.

For more information on our latest reporting, please see supplychange.org.



[1] Supply Change tracks corporate commitments that target reducing/eliminating deforestation from the production and sourcing of five commodities: cattle, cocoa, palm oil, soy, and timber and pulp.


Why Verra Supports REDD

Please note this article originally appeared in Verra: https://verra.org/why-verra-supports-redd/

24 January 2023 | Conserving threatened forests is critical to keeping global warming below 1.5 degrees celsius, and yet efforts by governments, multilateral organizations, philanthropic institutions, and NGOs have been insufficient to slow, let alone reverse, the relentless loss of forests and biodiversity. That’s because our economic system has evolved to value timber, minerals, and agricultural commodities that come from dead forests, but not the carbon sequestration, water regulation, and other ecosystem services that living forests provide – and on which our entire civilization depends.

Fortunately, the world is awakening to the desperate need to protect forests in light of the climate crisis, and Verra has been working since its inception in 2005 with leading scientists, conservationists, financiers and practitioners to establish a robust voluntary framework that enables society to value environmental benefits derived from project activities, including the protection of forests under threat through REDD – Reducing Emissions from Deforestation and forest Degradation. Due to Verra’s work, today projects implementing activities that protect forests under threat can be certified and issued carbon credits that equate to tonnes of carbon dioxide (CO2) avoided. The sale of those carbon credits channels previously unavailable finance for forest conservation.

In short, Verra’s REDD standards enable society to measure the greenhouse gas (GHG) emissions that are avoided by ensuring that forests at risk of being cut down or burned are kept standing. By valuing standing forests, REDD gives trees a fighting chance in the face of the numerous economic drivers that would otherwise do away with them.


Certifying REDD activities is not easy, in part because one has to quantify the risk of forest loss that would occur without the carbon project (i.e., the baseline). In other words, this requires counterfactual analysis, which is a fancy term for looking at a situation and asking what would happen if things were different. This approach isn’t unique to REDD and is a cornerstone of the impact analyses that government agencies, academics and others around the world use to determine what works, what doesn’t, and how to allocate resources. Counterfactual analysis is, by its nature, impossible to confirm with 100 percent certainty, but is critical if we are to channel more resources to protecting forests as a critical means of fighting climate change.

Awarding carbon credits to REDD projects requires extreme diligence, and we take that challenge seriously. For example, we ensure wide consultation on the most up-to-date science and best practices, as well as a thorough understanding of the available tools to measure forest loss and gain. This has been Verra’s guiding approach since we embarked on this journey, and continues to this day.

Unfortunately, in the last week The Guardian and Die Zeit, working in tandem with the privately-funded “investigative non-profit” SourceMaterial, published sensationalist articles using outlandish claims about the value of the REDD credits we have issued based on simplistic extrapolations of research that uses old, outlier statistical models. These are academically interesting exercises, but they would never pass muster as bona fide carbon crediting methodologies.

The approach underpinning these studies is problematic on several fronts. For one, the studies apply an overly simplistic tool to create their own counterfactuals, essentially ignoring the unique circumstances affecting each one of the projects – and which are critical to understanding the various drivers of deforestation and how they vary across landscapes. Another major limitation is that the data sets used are not appropriate for the task at hand. The studies rely on Global Forest Watch (GFW) data, which is a fantastic tool to identify the occurrence of deforestation across the world and identify hotspots, but has multiple limitations that have been recognized by GFW itself and others. For this reason, several studies have concluded and explicitly stated that this data should not be used off-the-shelf to estimate deforestation or for REDD purposes, although they may be used if suitable adjustments are made first. We are preparing our own analysis of the studies and will post that shortly.

Not all scientists agree, of course, but we do strongly believe that one-sided reporting, with an exclusive focus on a few cherry-picked studies, does not do justice to the realities on the ground and the wide range of opinions on this topic – including those of scientists who recognize that these projects are collectively protecting forests under threat and therefore keeping massive amounts of carbon emissions out of the atmosphere. Experts from many other organizations, including Everland and Sylvera have also chimed in to point out inadequacies in the scientific research supposedly supporting the journalist’s claims.


Verra pioneered the crediting of REDD projects, but we didn’t develop our program alone. We built it by relying on decades of research and experimentation by hundreds of scientists, economists, policy makers, and conservationists, and then convening multiple rounds of focused review and public consultation to develop program requirements and accounting methodologies for calculating the emissions that were avoided or reduced by keeping forests standing. We are very proud of that work and stand behind the emission reductions that have been achieved to date – each and every one of them followed the best-available science of the day and met the requirements we set out.

At the same time, we recognize that science advances, practices improve, and systems change, which is why all of our program requirements and methodologies are periodically reviewed to ensure they remain valid in the face of change. It’s also why we require all projects using older versions of the standard and methodologies to transition to the new and updated requirements. This mandatory aspect of our program requirements is essential as it embeds the underlying concept of continuous improvement.

While we have continuously updated our program requirements (e.g., we are currently on version 4.4 of the VCS Standard), we began the effort to update our REDD+ methodologies several years ago. We are in the final stages of that work, and there are four major components to it.

  1. Shorter baseline periods. As part of an update to the VCS Standard last year, we shortened the time frame for when baselines need to be recalibrated, from 10 to six years so that, in the case of REDD, estimates of future deforestation are more closely linked to the more recent past. While initially the science indicated that a 10-year period provided sufficient data for estimating deforestation, recent evidence indicates that 10 years is too long. All projects must now meet this new requirement.
  2. Allocating robust jurisdictional baselines. We are transitioning from a system of baselines proposed by the project proponents and vetted by third-party auditors and Verra, to a centralized system of robust jurisdictional baselines and allocating these to individual projects based on their local risk profiles. This will ensure that all the emission reductions achieved by projects “add up” properly to the jurisdictional whole. It will also enable REDD projects to contribute to jurisdictional REDD programs led by governments. While a system based on jurisdictional baselines has always been the long-term goal, until recently data gaps and methodological challenges prevented such an approach from being widely adopted. Fortunately, in many regions suitable data now exists, which combined with new methodologies (often relying on artificial intelligence and large-scale computing power) is enabling Verra to switch to this new approach.
  3. Consolidating methodologies. In the early days of REDD, we made a strategic decision to enable a lot of pioneering work on methodologies, as REDD had never been used before to issue carbon credits. That approach resulted in various methodologies that sometimes used different accounting methods, which were appropriate at the time. Now that the space has matured, we are confident we can apply the learnings from these various experiences and create a unified best-practice methodology that enhances consistency. That methodology has already undergone a public consultation (5 October – 6 November 2022), and we are now working to finalize and release it for use in the second quarter of this year.
  4. Digitalilizing Monitoring Reporting and Verification (DMRV). We are undertaking a major commitment to deploying the latest technology to support monitoring and verification across all VCS projects, including REDD projects. This will automate and standardize how data is collected, analyzed, and validated, enhancing both transparency and integrity. Last October we announced the creation of a Digitalizing Monitoring, Reporting, and Verification (DMRV) Working Group to inform how we can best incorporate new technologies, and in November we announced a pilot effort that will harness remote-sensing data to measure forest carbon.


REDD projects are not some abstract concept on a piece of paper; they represent real projects on the ground that deliver life-affirming benefits to communities and individuals in the form of agricultural training, education, and health care – while at the same time protecting forest carbon stocks and preserving critical biodiversity and water resources, to name a few additional benefits. In addition, REDD projects are, for the most part, located in the global south, which means that these benefits accrue to communities who tend to have few real development options. For them, REDD is a lifeline.

The stark reality is that huge swaths of the world’s forests are at risk, primarily because there are no real ways of assigning an economic value to them. If we are going to protect the world’s forests, we need an alternative to “business as usual”, where they get chopped down or burned for short-term economic gain. An effective and appropriately funded REDD+ mechanism means that day-to-day decisions about forests have another dimension to them – and it means they stand a far better chance of being conserved.

Furthermore, let’s not forget about the positive leakage that most REDD projects generate. For example, many projects work with governments to reduce illegal logging and mining across the landscape, secure land tenure for local communities to foster sustainable land use, introduce new agricultural production practices that reduce the need for slash-and-burn farming, and/or develop new markets for non-timber forest products. All these activities and many others result in positive spillover effects beyond the project boundary and generate meaningful, often very significant, additional carbon benefits, none of which is ever credited.


The voluntary carbon market is at an inflection point, and it can be a crucial element in the fight against climate change provided it can help companies meet aggressive Net Zero targets while also enabling investment in both emission reduction and removal projects. Specifically, it needs to make sure companies follow the mitigation hierarchy on their way to Net Zero, and that claims around the use of carbon credits are accurate (e.g., Voluntary Carbon Market Integrity Initiative, VCMI). In addition, it needs to make sure that the carbon credits sold in the market are achieving real emission reductions (or removals), which represents the important work of the Integrity Council for Voluntary Carbon Markets (ICVCM).

Today, we at Verra have issued over one billion carbon credits, which have channeled billions of dollars into climate action and helped forest communities thrive. For some, awarding credits based on a counterfactual scenario is too imprecise. However, there is simply no other approach if we are going to channel much-needed finance to protect forests under threat. Instead of waiting for imagined states of perfection, we have chosen to move forward with supporting forest protection projects around the world using these methods, which are constantly under review and continuous improvement. The urgency of the climate and biodiversity crises is too great to ignore this vital tool.

Rough winds do shake the darling buds of carbon markets

13 January 2023 | Voluntary carbon markets are vulnerable and could shrink rather than grow in 2023. Not linked to a stable driver of compliance demand, voluntary markets depend on the financial or reputational benefits they bestow on investors and carbon credit buyers. If the costs of engagement outweigh the benefits, carbon markets can quickly lose steam. There are two main reasons that contribute to an erosion of trust in the benefits of carbon market engagement: a proliferation of oversight initiatives that seek to improve the supply and demand of carbon credits; and the unclear relationship between Article 6 of the Paris Agreement and voluntary carbon markets, including the role of ‘corresponding adjustments’. Efforts to limit the space of legitimate use of carbon credits by companies, shrinking transactional volumes in 2022 and larger buyers exiting the market may be a first indication that the market is cooling.


A cacophony of codes, principles, and protocols

Over the last year, a multitude of regulators and standard setters have deliberated over proposals on how to control, steer and improve carbon markets. These markets continue to operate largely unregulated by governments, encouraging private initiatives to formulate their own rules for market oversight—both on the supply and demand side.


Initiatives that engage with corporate climate efforts discourage offsetting. The Science-based Target Initiative (SBTi) provides companies that adopt SBTi-approved targets with a path to reduce emissions in line with the temperature goals of the Paris Agreement. These pathways do not foresee offsetting as a viable strategy therefore companies cannot use offsets to meet their SBTi targets. Overall, concerns about carbon markets facilitating corporate ‘greenwashing’ are mounting. Restrictions on offsetting resonate well with traditionally skeptical NGOs when it comes to carbon markets. They often reject any form of carbon markets as a scam and claim that carbon markets worsen the climate and nature crises.


Risk of greenwashing can be avoided through clear and transparent corporate claims.  Over the last year, several public and multi-stakeholder initiatives have sought to provide guidance on corporate climate claims. Most notably, the VCM Integrity initiative (VCMI) has set out to provide guidance on the “high integrity voluntary use of carbon credits” by companies and the associated claims. In July 2022, the VCMI published a draft VCMI Claims Code of Practice for consultation; a final version of the Code is expected to be released in the first quarter of 2023. Governments also become increasingly concerned about the use of carbon credits in corporate climate strategies. Both the U.S. and the E.U. are in the process of drafting climate-related and sustainability disclosure regulation that seeks to address climate-related risks, including information on the use of offsets.


Another set of efforts seek to ensure that finance is channeled to high-quality carbon credits. Initiatives that seek to ensure a high-quality supply of carbon credits propose ways to harmonize and tighten the rules that lead to the generation of tradable emission reductions and removals. While established carbon standards claim that they are well prepared to continue ensuring a quality supply of carbon credits, the Integrity Council for Voluntary Carbon Market (ICVCM)’s Core Carbon Principles suggest otherwise. Enhancing transparency and high-quality of credit supply is also the stated objective of carbon credit rating initiatives, such as Calyx, Sylvera or BeZero, and tools that facilitate the assessment carbon credit quality.


Pursuing legitimate goals in themselves, the sheer number of initiatives that publish quality criteria for credits and claims create a perplexing investment environment. Even for the expert observer it is hard to understand how the various efforts will eventually complement each other. Some rules seem redundant to existing standards and others hardly practical. It does not help that almost all codes, principles, and guidance rally under the same elusive concept of “integrity.” The term’s inflationary use[1] seems to be fueled by its convenient vagueness. What is meant with integrity in the different contexts remains often unclear. It may mean to engage or not engage in carbon markets, to acquire or not acquire carbon credits, to use or not to use them against corporate climate goals. While integrity describes an outcome that implies trustworthiness, the various initiatives so far have done little to ensure market confidence.


Unclear relation to Article 6 Paris Agreement

A cross-cutting issue for these initiatives is the question of how voluntary carbon markets relate to Article 6 of the Paris Agreement. For some, voluntary carbon markets are true to their name—voluntary efforts that complement public climate policies; for others, voluntary carbon markets are a transitionary stage and should slowly converge towards a fully regulated landscape of carbon market transactions governed by Article 6 of the Paris Agreement.


In this context, a highly contested question is whether voluntary carbon credits can be used for offsetting purposes while contributing to the host country nationally determined contribution (NDC). The problem centers on the role and need of ‘corresponding adjustments’ for voluntary carbon market transactions. Such adjustments would ensure emission reductions for which carbon credits are issued cannot be accounted towards the host country NDC. Some worry that carbon credits without corresponding adjustments would lead to double claiming of emission reductions and removals, specifically the absence of clear guidance and full transparency around the use of compensatory carbon credits by corporates. Others fear that allowing the transfer of carbon credits to other countries will hinder the host countries’ ability to meet their NDCs, jeopardizing the global climate effort. Securing government commitments to corresponding adjustments will be cumbersome, lengthy and costly. Looming insecurity and the complex and costly processes that come with making corresponding adjustments put an enormous brake on carbon market transactions.


It is uncertain whether corresponding adjustments indeed contribute to the integrity of a carbon credit. Hailed as essential features of ‘integrity,’ it is often forgotten that vague and forgiving NDCs undermine the value of corresponding adjustments and as a result corporate climate claims.[2] The value that corresponding adjustments carry critically depends on the nature and engrained ambition of the host country’s NDC. A carbon credit backed by corresponding adjustment from a country without strong and quantified climate targets may gild ‘hot air’ and hold significantly less climate value than a real and additional carbon credit without a corresponding adjustment from a country with ambitious climate policies and a strong NDC.


The unclear relation between the Paris Agreement and voluntary carbon markets motivates government regulation. The outgoing year also saw an increase in government interest in regulating carbon markets. For developing countries, regulatory attempts are driven by a mix of concern and opportunity; concern that the corporate use of carbon credits could result in host country liabilities and opportunity to benefit from the proceeds of carbon credit sales. Two recent examples of developing country regulatory efforts are the rules adopted by Indonesia that link offset sales to the adoption of sectoral mitigation strategies and Ghana formulating rules for corresponding adjustments.


Carbon markets between integrity and desperation

While regulators and standard setters come up with a continuous stream of ideas on how to enhance its integrity, market participants add to the confusion. Responding to a mounting frustration that comes with uncoordinated and unpractical rules, an increasing number of initiatives tries to circumvent traditional carbon market rules like methodology development, consultations, and strict verification protocols. The engagement of blockchains in ‘laundering’ old Zombie projects or proposals to generate carbon credits from stratospheric geoengineering does not help the market to build confidence. Concerns have also been expressed with respect to large sovereign REDD programs that issue carbon credits that do not meet the standards of carbon market rules, or use crediting programs that issue credits for non-additional emission reductions and removals (such as the ART/TREES high-forest low-deforestation credits.)


While such efforts do not help carbon markets’ reputation, at this moment voluntary carbon markets remain the most effective cooperative tool to channel finance into mitigation projects and programs in developing countries. As public finance for climate finance remains shockingly scarce, it may be worth thinking twice before demonizing carbon markets. Rather than suppressing demand, constructively thinking on how to grow demand and channel finance at scale into mitigation efforts in developing countries could prove valuable. Safeguarding carbon markets means considering the drivers of demand that depend on carbon market integrity, defined as fair and transparent, confidence-inspiring rules.


Finding a way through the maze

Confidence in carbon markets depends on clear and transparent rules of engagement. Ideally, government bodies or, in the interim, multi-stakeholder initiatives coordinate to issue one coherent set of rules how carbon credits can be generated and used. Market-compatible rules include definitions and disclosure rules with respect to corporate climate goals and the use of carbon credits, ideally backed by intuitively understandable and transparent corporate climate claims. Such claims should include offsetting and non-offsetting claims. Government regulators can further ensure high-quality supply by accrediting and approving standard-setters that meet and ensure that these principles are upheld. Carbon credit rating and quality assurance initiatives can help to describe the main features of a real and additional carbon credit.


Governments, in particular in developing countries, may also contemplate measures to attract carbon market investments. Governments could approach carbon pricing holistically and consider the carbon markets as part of their climate policy toolbox. They could clarify how carbon markets complement government climate measures and identify priority project activities for carbon markets that are linked to technology transfer, higher costs, or sectors where public action is politically challenging. This also involves adopting rules that govern Article 6 investments and clarify when a country may contemplate authorizing corresponding adjustments.


For now, it remains to be seen whether carbon markets survive the stress test of confusion. If the rules remain unfinished, and their interactions remain unclear, they add insecurity to markets as investors do not know whether and when they are able to comply with the emerging rules. If corporates increasingly lose the social license to engage in carbon markets as a recognized mitigation strategy, markets may crumble.


There’s value to remember that carbon markets remain vulnerable, needing support in addition to constraint.

[1] Ecosystem Market Place even called its August 2022 market update “The Art of Integrity.”

[2] Corresponding adjustments may limit host country’s willingness to adopt ambitious NDCs. If NDCs do not foresee strong targets, corresponding adjustments come at little costs (and may indeed involve hot air,) while countries with strict economy-wide targets will be reluctant to agree to corresponding adjustments.

COP27: Key Takeaways and What’s Next
WRI Blog

Originally published on WRI Insights Blog.

8 December 2022 | The COP27 climate summit in Sharm el-Sheikh, Egypt concluded with a historic breakthrough to help vulnerable countries deal with losses and damages from the impacts of climate change. But the talks also disappointed many stakeholders by not taking any significant new steps to curb emissions, which are critical to limit temperature rise to 1.5 degrees C (2.7 degrees F) and avoid a far more dangerous world. And despite some bright spots, progress on adaptation was also less than hoped for.

The climate summit witnessed some noteworthy moments, such as a visit from Brazilian President-elect Luiz Inácio Lula da Silva, greater attention to Barbados Prime Minister Mia Mottley’s Bridgetown Agenda which calls for reforms to the global financial system and the resumption of climate discussions between China and the United States. While there was major geopolitical fracturing this year, this gathering showed that international cooperation on climate change still can yield dividends, as the agreement on loss and damage finance demonstrates. This coming year will be an opportunity for that essential cooperative action to go much further.

Here are key takeaways from the COP27 climate summit, and where the world needs to go next:

1) Fund Established to Aid Countries Facing Severe Damage from Climate Change

For nearly three decades, vulnerable countries have called for financial support to help them cope with the most severe impacts of climate change, only to be stonewalled by rich nations time and time again. Creating a funding stream to address “loss and damage” became the litmus test for success at COP27.

Intense flooding in Bangladesh.
Intense flooding in Sylhet, Bangladesh in June of 2022 left many scrambling for refuge. For three decades, vulnerable countries have pushed for funding for climate change losses and damages, and COP27 presented a dedicated funding stream for this issue. Photo by SM AKBAR ALI PJ/Shutterstock

After two weeks of hard-fought negotiations that teetered on the verge of collapse, countries finally reached consensus to establish funding arrangements, including a dedicated fund for loss and damage. This was nothing short of a breakthrough on a topic long neglected by UN climate talks. If properly resourced and mobilized, the loss and damage fund can complement a wider mosaic of solutions to provide lifelines for poor families whose houses are destroyed, farmers whose fields are ruined, and islanders forced from their ancestral homes.

COP27 saw other important progress addressing losses and damages as well. Governments made progress on the governance structure and host selection process for the Santiago Network on Loss and Damage, which will provide technical assistance to developing countries and become fully operational by COP28. The UN also unveiled a $3.1 billion plan to ensure everyone on the planet is covered by early-warning systems in the next five years to bolster countries’ ability to prepare for hazardous weather.

The V20 and G7 jointly launched the Global Shield against Climate Risks to provide vulnerable countries more means to protect themselves from increasingly extreme weather, with Germany providing €170 million ($179 million) in grants. Denmark, Belgium, Scotland, Austria, New Zealand, Canada, Ireland, the U.S., the U.K., Spain, the E.U. and France made financial commitments related to addressing loss and damage, with the U.K. also announcing it will suspend vulnerable nations’ debt repayments for up to two years following a climate disaster. However, not all of these commitments were new and additional. They are largely part of broader funding arrangements outside the UNFCCC, that comprise the mosaic of solutions to address loss and damage.

What’s next? Now that countries have established a fund, the hard work of designing and ultimately filling it begins. Negotiators formed a Transitional Committee to develop recommendations, which should be operationalized by the UN climate summit in Dubai in 2023 (COP28), along with the broader framework for funding arrangements, including funds and initiatives inside and outside the UNFCCC. Furthermore, over the next year countries will work on selecting the host organization, electing members of the Advisory Board, and hiring the secretariat for the Santiago Network.

2) Progress on Adaptation, but not at the Scale or Speed Necessary

Unlike the breakthrough on loss and damage, the progress on adaptation fell far short of what’s needed to address accelerating and severe impacts.

For one, developed countries did not make significant headway towards honoring the commitment made as part of the COP26 Glasgow Climate Pact to double adaptation finance from 2019 levels by 2025.  A roadmap for implementation of this goal was not agreed to as planned, leaving parties with less confidence that this goal will be met by 2025.

Countries were also expected to make progress on defining the Global Goal on Adaptation, the Paris Agreement’s equivalent to the 1.5-degree-C (2.7 degrees F) target for mitigation. COP27 saw intense but welcome discussions on potential components of the goal, including a more structured approach that systematically considers themes like gender responsiveness, capacity building, as well as local and indigenous knowledge. But in the end, parties fell short of defining the goal and instead established a framework to guide its formulation, which will be considered and adopted at COP28 next year.

In other positive news, the Adaptation Fund received $230 million in pledges and contributions to be channeled to countries most vulnerable to climate impacts, some of which is fulfilling earlier commitments made at COP26.

And the COP27 Egyptian Presidency, with the High-Level Climate Champions and Marrakech Partnership, launched the Sharm El-Sheikh Adaptation Agenda, a joint action plan to accelerate transformative solutions through systems interventions and a set of adaptation outcome targets, rallying both state and non-state actors work towards achieving them by 2030. The finer details of how this agenda will be implemented and progress monitored are yet to be worked out.

What’s next? Over 2023, all eyes will be on whether parties adopt a strong framework for the Global Goal on Adaptation, whether financial pledges — to the Adaptation Fund, Least Developed Countries Fund and others — are fulfilled; if progress is made towards doubling adaptation finance and the extent to which MDBs scale their adaptation efforts. There will also be attention on whether these funds are accessible and reach local levels.

3) Climate Finance Reforms Gained Traction

Climate finance took center stage in negotiations this year. The COP27 decision reflects developing countries’ serious concern that developed countries’ commitment to provide $100 billion annually has still not been met, even as the need for finance grows ever-more obvious.

Many developing countries also expressed dissatisfaction with the way finance is being provided, including the large percentage coming as loans, increasing the debt burden in already debt-stressed countries, and the lack of accountability and transparency.

The need to reform the broader public financial system, including multilateral development banks, received increased attention, including in the cover decision. This serves as acknowledgment of the need for more climate finance and to address the way debt might hamstring developing countries’ climate action, as laid out in the Bridgetown Initiative, a call to reform the international financial system announced earlier in the year by Prime Minister Mottley of Barbados. At COP27, leaders from both developing and developed countries expressed support for the initiative, including President Emmanuel Macron of France.

Ultimately, new climate finance pledges were more limited than what was hoped for; indeed, countries are still waiting for fulfillment of previous pledges. Meanwhile, negotiations on important agenda items — most notably the new finance goal for 2025 — did not make significant headway. Instead, Parties focused on procedural issues and pushed to the future important decisions around the amount, timeframe, sources and accountability mechanisms that may be relevant to a new finance goal. Negotiators also postponed in-depth discussions on a shared definition of climate finance and on operationalizing Article 2.1(c) of the Paris Agreement, which calls for consistency of global financial flows with the Paris Agreement.

What’s next? In 2023, we will see whether developed countries finally come through on their commitment to provide $100 billion annually to developing countries, and if they show signs of accelerating pledges to make up for the shortfall in prior years. We will also see how far Parties manage to come in negotiating the details (quality of funding, timelines, instruments, sources, access, etc.) of the new climate finance goal and provide some stepping stones for its establishment in 2024. More will emerge on the MDB reform agenda by the IMF/World Bank spring meetings in April 2023, a date by which U.S. climate envoy John Kerry said he wants to see actionable proposals. COP28 will also need to enhance the understanding of the scope of Article 2.1(c) and on ways to achieve it by building on the two workshops on the topic to be held in 2023.

4) Emission Cuts Didn’t Add Up

Countries at COP27 agreed to outcomes that reflected only modest, incremental progress on reducing emissions, despite a clear emissions gap between current national climate plans and what’s needed to limit temperature rise to 1.5 degrees C (2.7 degrees F).

The Glasgow Climate Pact adopted at COP26 requested parties to “revisit and strengthen their 2030 targets” to align with the Paris Agreement temperature goal. Yet since then, only 34 of 194 parties have submitted new or updated NDCs though this did include major economies such as Australia, Mexico, and Indonesia. The COP27 decision reiterated the request to Parties that have not yet done so to revisit and strengthen their targets to align with the Paris temperature goal. Encouragingly, the E.U., which had already strengthened its target in 2020, announced that it would further boost its target from a 55% to a 57% reduction by 2030

The Glasgow Climate Pact also urged countries to develop long-term strategies “towards just transitions to net-zero emissions” no later than COP27 and invited countries to update those strategies regularly. Yet the last year saw only 11 new strategies, bringing the total to only 54. The COP27 decision urges remaining parties to communicate their long-term strategies by COP28.

COP27 also saw progress on the Mitigation Work Programme, adopted at COP26 to focus on scaling up ambition and implementation this decade (i.e. leading up to 2030). Negotiators determined that the Programme will run through at least 2026, focus on all sectors, and provide recommendations for annual COP decisions, though it stopped short of allowing the process to establish new goals to reduce emissions. Each year under the Programme, at least two dialogues and a subsequent summary report will be produced and considered by countries at the political level to catalyze stronger national mitigation ambition and action.

Outside the formal negotiations, more countries committed to reducing emissions of short-lived climate pollutants. Twenty additional countries signed on to the Global Methane Pledge, launched at COP26 to reduce methane emissions by 30% from 2020 levels by 2030, bringing the total to 150 (including 12 of the top 20 methane emitters). China, which has not joined the pledge, announced that formal approval was pending for its completed plan to address methane emissions.

What’s next? As gaps in emissions reductions persist, countries, especially major emitters, must urgently put forward robust and ambitious climate plans and pursue stronger policies to cut emissions, including through action in sectors and methane, to drive the transformations needed to limit temperature rise to 1.5 degrees C (2.7 degrees F). Nex year, the first steps in the Mitigation Work Programme and the outcomes of the first Global Stocktake at COP28 will serve as a key opportunity for countries to collectively agree to paths forward for cutting emissions in key sectors.

5) Debate Lingered on Accelerating the Energy Transition

The transition away from fossil fuels became an unexpectedly hot topic during COP27.

Last year, COP26 ended with a debate over language on phasing out unabated coal power, which ended in a compromise calling for a “phase down.” This year, as it had done in 2021, India proposed extending the phase down to all fossil fuels, a proposal that gained support in Sharm el-Sheikh from 80 countries, including those in the E.U.

Some countries resisted that proposal, and it was ultimately excluded from the final COP27 outcome, but the issue will likely resurface as a key issue at COP28.

Also, given the decision at last year’s COP on coal power, questions remain about how much headway countries have made on honoring their commitments to phase down coal.

Meanwhile, for the first time ever, the COP cover decision included a call to accelerate renewable energy deployment. But that progress was blunted in the waning moments of the COP when language on deploying low-emissions energy was also added without many delegations knowing about it. While many have interpreted the reference to “low emissions” as referring to natural gas, natural gas is not actually a low emissions power source, particularly given the continued high level of methane leakage.

People installing solar panels on a roof in Spain.
The installation of solar panels in the Balearic Islands, in Spain. For the first time ever, the COP cover decision included a call to accelerate renewable energy deployment. Photo by tolobalaguer/Shutterstock

Outside the negotiations, just energy transition partnerships (JETP) — a concept first announced at COP26 as a support package for South Africa — received increased attention. The South African government recently released a detailed investment plan of its own for a just energy transition; it indicates a total amount of $98.7 billion in needed investment, while donor governments have pledged $8.5 billion, only 2.7% of which will be in the form of grants. South Africa has now signed loan agreements with France and Germany for the two European nations to each extend €300 million in concessional financing to South Africa to support the country’s just energy transition.

At the G20 Summit in Bali, which took place simultaneously with COP27, a JETP framework for Indonesia was announced, with $10 billion in finance from the U.S., Japan and multiple E.U. countries, plus $10 billion from the private sector. The details, including what the private investment component will look like, will be worked out later. Meanwhile, a JETP for Vietnam may be launched at the EU-ASEAN summit in mid-December and could total as much as $14 billion. Reports suggest that between $5 billion and $7 billion will come from public loans and grants, with the rest from private sources.

What’s next? Next year is likely to see a continued debate on the question of whether all fossil fuels, not only coal, should be phased down or out, potentially a central issue for COP28. And as the JETP approach gains attention, important questions will need to be answered, including what types of finance they involve (such as how much in highly concessional finance and grants) and support for workers and communities will be reflected in the financing and investment plans — including for Indonesia and Vietnam, as well as for South Africa.

6) The Global Stocktake Shifts from the Technical to the Political

The Paris Agreement’s “Global Stocktake” is a process where countries assess collective progress toward the Paris Agreement’s goals every five years, with the intention of ratcheting up ambition and action over time. COP27 saw the mid-way point of the first Global Stocktake process. Countries agreed on the need to prepare for the final political phase of the process, which will conclude at COP28 in the UAE. That phase will include a COP decision or declaration with recommendations and political messages on key issues for climate action and support.

At Sharm El-Sheikh, technical discussions under the Global Stocktake focused on how countries and non-state actors can address current gaps in climate action across mitigation, adaptation and support. The third and final technical dialogue is expected to be held at the intersessional meeting in Bonn, Germany in June 2023, with the political phase concluding at COP28 in 2023.

What’s next? To prepare for the final political phase of the Stocktake over the coming year, countries agreed to communicate and discuss their views on its approach and desired political outcome. This marks a shift of focus from the technical to the potential political outcomes of the process, which will be critical to ensuring impact. The Global Stocktake can play a critical role in driving further sectoral action, cooperation, and support in this decade and beyond, and nations should push for a politically relevant outcome rather than an information-sharing exercise with vague recommendations. Moreover, countries reiterated the invitation to hold events at national, regional and international levels to support the process and welcomed the UN Secretary-General’s efforts to convene a climate ambition summit in 2023 ahead of the conclusion of the first Global Stocktake.

7) Important New African Initiatives Launched

COP27 was dubbed the “African COP” due to its location in Egypt, and under this theme, several African-led initiatives earned the spotlight.

For example, three financing partners of AFR100, an initiative where 32 African governments committed to restore more than 120 million hectares of degraded land by 2030, announced a $2 billion blended finance mechanism to support and accelerate locally led restoration. The massive financial commitment sends a clear signal that restoration enterprises are sound investments.

The African Cities Water Adaptation Fund (ACWA), and its supporting coalition, was launched at COP27 as well. The new effort will enable African city leaders to directly access funding and technical support to implement innovative solutions targeting a range of water issues, including integrated governance, watershed management, increasing sanitation services, improved stormwater management and wastewater management. The Fund will deliver $222 million in grants, $288 million in direct investments, and indirectly leverage $5 billion in additional investments to help implement resilient water solutions in 100 African cities by 2032.

Muddy river with boats and people with fruits on shore.
The muddy waters of the Niamey River are used for transporting goods in Niger. A new fund launched at COP27 will support innovative solutions for targeting water issues in Africa. Photo by Katja Tsvetkova/Shutterstock

These initiatives are indicative of growing interests in using blended-finance — combining public and private funds — to further mobilize much-needed capital for resilience investments in Africa. Scaling such vehicles and investing in local capacities to design, implement and leverage further investments remains crucial to meet the scale of the challenge.

8) Carbon Market Rules Raise Concerns

Most rules for carbon markets were finalized  at COP26, and COP27 was meant to iron out operational details. Unfortunately, Parties struggled with the sheer volume and highly technical nature of the text.

Anticipated recommendations on activities involving removals released at the outset of COP27 were insufficient and will be updated before COP28 — ideally with a greater focus on safeguards and human rights. No decisions were taken to address double counting of emission reductions between countries (as part of their NDCs) and non-state actors such as companies — or to clarify in which cases this could undermine the integrity of carbon markets and give the impression that emissions are being reduced more than they actually are.

On a promising note, the UN Secretary-General’s High-Level Expert Group on Net-Zero Emissions Commitments of Non-State Entities released a new report during COP27. Among other recommendations, the report suggested that high-quality carbon credits cannot substitute for emissions cuts needed for achieving targets along the net-zero pathway. Instead, high-value carbon credits should only count toward curbing emissions beyond a corporation’s own value chain.

What’s next? While many hoped that the finer details of how carbon markets should operate would be hashed out in Egypt, parties instead agreed to continue negotiations over the next two years. Over the next year, multi-stakeholder initiatives such as the Integrity Council for the Voluntary Carbon Market (IC-VCM) and the Voluntary Carbon Market Integrity Initiative (VCMI) will continue to advance their respective efforts to promote carbon credit quality and the integrity of corporate claims based on carbon credit use.

9) Nature-Based Solutions are Elevated

At COP27, nature-based solutions were included in a UN climate negotiations’ cover decision for the first time. The text encourages Parties to consider nature-based solutions or ecosystem-based approaches while ensuring relevant social and environmental safeguards, though an effort to more explicitly link nature and climate in the cover decision ultimately failed.

The decision text was complemented by signs of increased political will and new financial commitments.

Young people planting mangrove trees.
In Semarang, Indonesia, young people volunteer to plant young mangroves as part of restoration efforts on bodies of water. For the first time, nature-based solutions were a part of a UN climate negotiations’ cover decision at COP27. Photo by Moh. Saefudin/Shutterstock

Outside the negotiations, the launch of the Forest and Climate Leader’s Partnership (FCLP) brought together 28 countries (and counting) to halt and reverse forest loss and degradation by 2030.  Brazil, Indonesia and the Democratic Republic of the Congo also announced a partnership to cooperate on forest preservation. While a unified voice from tropical forest countries could raise much-needed finance, as the partnership’s strategy develops, it will be crucial to ensure local communities play a significant role.

Of the $12 billion pledged by governments at COP26 to protect, restore and sustainably manage forests over five years (2021-2026), countries announced that $2.67 billion has already been spent. Germany doubled its committed finance from €1 billion to €2 billion. Private entities added $3.6 billion to the $7.2 billion committed in Glasgow for protection and restoration, including the LEAF coalition’s announcement of $500 million to purchase high-integrity emissions-reduction credits, as well as the establishment of the Forests, People, Climate collaborative, which committed $400 million of philanthropic funding.

What’s next? On COP27’s Biodiversity Day, key climate leaders as well as a group of 350 scientists, Indigenous Peoples, businesses and NGOs urged governments to prioritize the UN’s Biodiversity Conference (COP15) and create a Paris Agreement-like treaty to turn the tide on biodiversity loss. We will know whether this happens before the end of the year.

Cover Image by: UNclimatechange/Flickr

ART Issues World’s First Jurisdictional Forestry TREES Carbon Credits to Guyana
EM Strategic Supporter Press Release

ARLINGTON, VA, 1 December 2022 – The Architecture for REDD+ Transactions (ART) has issued the world’s first TREES credits to Guyana. This also marks a milestone as the first time a country has been issued carbon credits specifically designed for the voluntary and compliance carbon markets for successfully preventing forest loss and degradation — a process known as jurisdictional REDD+.

Following completion of an independent validation and verification process and approval by the ART Board of Directors, ART has issued 33.47 million TREES credits to Guyana for the five-year period from 2016 to 2020. These serialized credits, listed on ART’s public registry, are available to buyers on the global carbon market, including for use by airlines for compliance with the International Civil Aviation Organization’s global emission reduction program, CORSIA, as well as for use toward voluntary corporate climate commitments.

Guyana’s completion of the ART process paves the way for other governments that are looking to receive carbon market finance for success in protecting and restoring forests. Currently, 14 other countries and large sub-national jurisdictions are working toward their own issuances of TREES credits.

Frances Seymour, the Chair of the ART Board, congratulated the Government of Guyana and the many domestic stakeholder groups who contributed to this achievement, which recognizes the success the country has had in protecting its forests. “Guyana is the first to complete the ART process for generating high-integrity, Paris Agreement-aligned carbon credits that will allow the country to access market-based finance to continue to implement forest stewardship strategies. ART, other governments, and important stakeholder groups, especially Indigenous Peoples and local communities, around the world can now build on Guyana’s experience to accelerate progress towards meeting global forest and climate goals in ways that ensure environmental and social integrity.”

Vice President of Guyana, Dr. Bharrat Jagdeo lauded Guyana’s leadership and tenacity, which started in 2007 when Guyana set out a far-reaching vision for how national scale action on forests could unlock huge global benefits in the fight against climate change, the preservation of biodiversity, and building energy and food security. The Vice President stressed that ambitious progress was possible – in Guyana and elsewhere – if the peoples of forest countries designed their own way forward so that action on forests boosted their legitimate development aspirations.

“The people of Guyana continue to be willing to play their part – but we also need international standards that keep pace with what science tells us is needed to safeguard the world’s vital tropical forests. So, we are pleased that ART-TREES was created to help accelerate global climate action – by recognizing what forest countries like Guyana have long called for: that the time for small-scale pilots and projects is long past, the world needs jurisdiction-scale action to make the required impact, and the world also needs to value the ecosystem services that tropical forests provide. Today, the vision set out in 2007 moves to the next phase – where payments for forest climate services can be sourced from global carbon markets. We are pleased that the vision of fifteen years ago moves forward in a major way today,” the Vice President said.

The independent validation and verification process was conducted by Aster Global Environmental Services, Inc., an internationally accredited environmental services company, which audited Guyana’s REDD+ results for conformance with both the carbon accounting requirements and the rigorous social and environmental safeguards of TREES.

On behalf of his colleagues, the Chair of the National Toshaos’ Council in Guyana, Toshao Derrick John said, “The National Toshaos’ Council welcomes this important milestone in Guyana’s programme on Low Carbon Development which will further support the development of sustainable livelihoods and protection of forests within indigenous communities. As the national body which represents all elected Indigenous Villages Leaders in Guyana, the NTC is pleased that Guyana is pioneering efforts on climate finance that will bring direct benefits to Indigenous peoples in advancing climate resilience and sustainable livelihood opportunities.”

Endorsement for the government to sell credits from Guyana’s Indigenous lands — both titled and untitled – including the terms of benefit sharing, was given by the National Toshaos’ Council, which includes leaders elected by each community and is the legal representative of Indigenous peoples in Guyana.

Guyana’s TREES credits are also the first market-ready credits issued to a jurisdiction classified as “High Forest, Low Deforestation” (HFLD), which means it has high forest cover and low historical rates of deforestation. Carbon markets have historically focused predominantly on areas that have already experienced high rates of deforestation. This is now starting to change with the first TREES credits issued to Guyana.

Prior to the crediting approach in TREES, there had not been a market-oriented approach that allows HFLD jurisdictions to benefit from carbon market finance. The HFLD crediting approach in TREES recognizes that HFLD jurisdictions must continue to aggressively protect forests to avoid deforestation and degradation, and that carbon market finance can be a powerful incentive to help achieve this. All HFLD credits are tagged as such on ART’s public registry.

Mary Grady, Executive Director of the ART Secretariat, said, “Our planet’s last intact forests are under mounting threat of irreversible, permanent loss if new approaches to protect them are not urgently supported. Without the proper financial incentives to value forests and the actions that protect them, there is no guarantee that forests in HFLD areas will remain standing in the long run. Providing a pathway that incentivizes jurisdictions to keep their forests standing will create a more effective and equitable global system for forest protection and restoration.”

Today’s VCM, Explained in Three Figures

Is the market truly booming? Are offsets the next big solution or a scam? And what’s up with carbon crypto tokens? Here’s a quick tour through the voluntary carbon market, courtesy of our Ecosystem Marketplace analysts.

If you want to learn more, visit our public Data Intelligence & Analytics Dashboard, and download the latest State of the Voluntary Carbon Markets report, where all of these insights were first published.

One: Voluntary carbon credit transactions quadrupled in value last year, but in the big picture, they’re still a drop in the bucket.

Voluntary Carbon Market Value, pre-2005 to 2021.

Source: Ecosystem Marketplace, 2022.

Voluntary markets leapt from $520 million in 2020 to $2 billion in transactions in 2021. That jump was driven in large part by rising prices for credits, especially for nature-based credits for activities like reforestation, “blue” carbon from coastal and marine ecosystem projects, and avoided forest conversion. Buyers like these credits in part because they deliver non-carbon benefits such as income for communities, or protecting biodiversity. We’ll come back to that point later.

This boom is a sign that net zero carbon pledges are moving the needle, and companies and other actors are using offsets to trim emissions that are otherwise hard to cut right away.

It also means $2 billion in additional finance for green projects around the world. Overall, the voluntary carbon markets have delivered $8 billion in climate finance since we began tracking them in 2005. That’s a significant contribution to the climate effort, but when you compare it to, say, fossil fuel subsidies, which total $6 trillion a year, it’s a pretty small number.

Likewise, when you measure humankind’s total global emissions every year, voluntary carbon market activity at 500 million tons equates to only about five days’ worth of emissions. Carbon offsets, in other words, are a useful tool, but neither a silver bullet nor a global menace.

Two: Carbon credits are more like sandwiches than soybeans.

What’s in a Category? Ecosystem Marketplace’s Carbon Offset Project Typology, 2021.

Source: Ecosystem Marketplace, 2022.

In other words, they’re much more a heterogeneous product (with attributes that vary significantly from one another, and consumer segments with different quality preferences) than a homogeneous commodity. That might not be immediately obvious – isn’t a ton of carbon always a ton of carbon when it comes to mitigating climate change?

Yes. And yet one of the side effects of a renewed focus on carbon markets integrity has been a sharpening of preferences on attributes that differentiate one ton of CO2e from another: does the project deliver co-benefits for communities or biodiversity, for example? Is it a carbon reduction or removal? Is the credit nature-based or technological?

Suppliers have responded with lots of choices. We tracked 170 different credit types transacted last year. The figure above shows them grouped into eight general categories.

We’re seeing a very clear price premium above that price for credits with additional non-carbon social and environmental benefits. Projects in the Forestry and Land Use category command the largest share of trades (46%) and the highest prices with a weighted average price in 2021 of $5.80 per ton. (Our 2021 global benchmark price across the whole market is $4.00 a ton.)

Renewable energy comes in second in terms of trading volumes (43% of trades) but at far lower per-credit prices: $2.26/ton on average in 2021, probably reflecting a consumer segment that is mainly buying based on price – a very different group from the Forestry and Land Use buyers.

Ecosystem Marketplace has made a number of upgrades to its data infrastructure and user services in response to this diversity, to provide richer, more detailed, and even more highly vetted data. A high-integrity market requires not just transparency but granularity. As we’ve seen, there’s more to a credit than a ton of carbon.

Three: Direct relationships and a good project story are still preferred over more standardized exchanges and crypto.

Buyers’ and Sellers’ Preferred Voluntary Carbon Market Transaction Methods, 2021.

Source: Ecosystem Marketplace, 2022.

We’re seeing lots of new entrants offering new ways to trade carbon credits. We asked our Global Carbon Survey respondents how they prefer to buy and sell.The vast majority still prefer bilateral deals between project developers and end buyers. These are advantageous for project developers, who can respond directly to corporate requests for proposals and build a relationship. Project developers also get to shine in retail marketplaces and niche marketplaces (the third and fourth most popular transaction options) that allow for storytelling and rich information about projects. And buyers get to develop a more direct relationship with the project proponents, who may be half a world away.

Intermediaries such as futures exchanges are popping up these days, but have yet to gain as much traction. By working with digital spot trading exchanges they can also offer standardized futures contracts pegged to specific project attributes or compliance requirements. As futures contracts become more common (so buyers can secure future supply of credits), these exchanges could get more popular.

Crypto has had a lot of recent media coverage, but was identified as respondents’ least preferred transaction method. Blockchain, as a disruptive technology, could represent a new area of innovation and growth, or, if abused, a throwback to the old “carbon cowboys” days of the voluntary markets. Several leading market institutions are developing guardrails to make sure that tokens marketed as delivering the benefits of carbon credits are in compliance with the standards bodies issuing the initial credits.

EM Respondent Blog
Simplifying and amplifying best practice in using carbon credits for climate action

The climate crisis is urgent and progress is slow.

Despite efforts to up ambition, the climate pledges by governments remain woefully inadequate in limiting average global temperature rise to 1.5℃ – the figure climate scientists define as the threshold of safety.

We know that targets have been set – but society’s ability to meet them moves further out of reach every day. The annual UN Emissions Gap report remains a constant reminder of the yawning gap that persists between the emission reductions considered in governments’ climate pledges and the reductions we need.

In today’s divided age, one of the few things that most of us can agree on is that we must dramatically increase the speed and scale of climate action today to avoid the irreversible effects of climate change tomorrow. We must find effective ways to finance clean technology, fair transitions, and global emission reductions. In all of this, the role of the private sector in ramping up climate finance is critical, particularly in light of the highly insufficient action by governments.

Importantly, we all want to make sure our efforts have the greatest possible impact. In this vein, carbon credits, and the voluntary carbon markets (VCM) on which they trade, may be the most misunderstood climate solution in the world. The carbon credits (or offsets) sold via these marketplaces are validated and certified via rigorous standards applied by 3rd party auditors, and have already channeled billions of dollars in finance to drive verifiable climate change mitigation – well ahead of government regulation on climate change and as standards continue to improve in line with new science, technologies, and lessons learned to ensure high quality.

No other form of finance can claim the level of transparency in measuring impacts as carbon credits. And while voluntary markets are far from perfect, they work.

Carbon credits remain one of the most viable, near-term options for companies to measurably reduce global emissions. With emissions-free operations still a far-off prospect, science says that companies must invest in emission reduction activities beyond their direct operations, for example through certified carbon credits – all while working on the long term task of decarbonizing their value chain. Done right, the VCM can deliver much-needed finance, technical capacity, and significant sustainable development benefits that can help countries reach their goals, and transition the world to the low-carbon future that it needs.

But the complexity of the VCM and the fact that corporations are often motivated to use credits to polish their image, make offsets easy to criticize – and the system difficult to understand. A related challenge has to do with companies credibly using carbon credits as part of corporate targets and talking about the role that carbon credits play in their overall climate action efforts. Part of the problem is that the latest best practice in using carbon credits is not simple, actionable, or written in a language easy to understand by most companies and CEOs.

To truly move the dial on addressing runaway climate change, carbon credits should be used and talked about by corporations according to a clear set of principles that simplify and amplify the right way to do things – grounded in science and building on the work of many credible initiatives, such as the Science-Based Targets initiative (SBTi) and the Voluntary Carbon Markets Integrity Initiative (VCMi), among many others.

Our hope is that these principles will empower governments, businesses and society as a whole to have an informed discussion around the importance of carbon finance as part of global climate action.

This blog first appeared on South Pole’s Penguin Perspectives.

FSC launches its Climate Coalition at COP27 to drive progress on forest-based climate solutions

12 November 2022 | Today at the 2022 United Nations Climate Change Conference (COP27), FSC Director General, Kim Carstensen, officially launched the FSC Climate Coalition as a new forum to convene key stakeholders in the fight against climate change.

The FSC Climate Coalition will be a multi-sector partnership platform for creating and testing climate solutions that originate from forests. The goal of the initiative is to turn ideas into action by bringing together partners who might not otherwise interact to collaboratively refine and pilot projects. Included in the group will be perspectives from various points in the value chain – project developers, corporations, investors, carbon standards, indigenous representatives, environmental groups and research bodies.

Reflecting on the need for partnership, Kim Carstensen said “FSC has over 26 years of experience as a convening body. Now, let’s put that to use in ensuring that forests are incorporated in climate action in a way that benefits forest stewards. To do this, we need partners.”

Carstensen was joined on stage by senior representatives from some of the first FSC Climate Coalition members: FSC certificate holders Ikea and SIG, the non-profit Forest Trends, the project developer South Pole, as well as carbon standards Verra and Gold Standard.

Marco Magini, Director Climate Projects at South Pole, voiced their enthusiasm for the initiative “Such collaborations enable open, honest conversations about what’s working and what’s not, which allows all of us to learn faster. We’re already well into our ‘decade of action’ and we just cannot afford to have everyone trying to figure out forest-based climate solutions by themselves. We must work together to have a true climate impact, and we must act faster, today.”

Nature-based solutions (NBS) have been a major topic at COP27 this year, with a growing consensus that forests have a role to play, particularly in the ongoing conversation about carbon accounting. Reflecting on the latest trends, Stephen Donofrio, Managing Director, Forest Trends’ Ecosystem Marketplace and Supply Change initiatives, shared that “In the voluntary carbon markets, we’ve seen that climate is the bait and co-benefits are the hook, when it comes to increasing demand and price paid per credit. Our data consistently shows market preferences for carbon credit projects that are rich in social, biodiversity, water and other environmental attributes”.

Tackling the complexity of certification, carbon accounting, carbon credits, and carbon rights will be the first major topic for the FSC Climate Coalition, which will begin to formally convene in early 2023.

This article first appeared on the FSC News Centre.

For more information on the FSC Climate Coalition, please reach out to Theresa Keith ([email protected]).

Scaling up forest-based solutions for planetary crises


15 November 2022 | “The world is facing climate change, deforestation, and biodiversity loss,” said Janne Narakka, the Strategic Planning Committee Chair of the Forest Stewardship Council (FSC)’s Board of Directors. “Forests are currently high up on many global agendas: there are many different expectations on them – and on the solutions they could provide.”

He made the comments at a keynote session during the FSC’s General Assembly 2021-2022, held on 11 October 2022 in Bali, Indonesia, which set out to explore the central role of forests in the face of these crises and highlight the work required by institutions like FSC to ensure that forest-based solutions are deployed as effectively – and equitably – as possible. “With an estimated strong increase in global timber demand, we have to work to expand FSC’s forest management to bring our impact to new areas,” said Narakka; “but at the same time, it is important to work on new services to respond to the new demands on forests – such as for biodiversity and water purification.”

On that note, Valentina Lira, the sustainability director of Chilean winery Concha y Toro (the second largest winery in the world), shared her company’s approach to implementing FSC’s Ecosystem Services Procedure (ESP), which allows groups to identify, measure, and verify the positive impacts of responsible forest management. “Forestry is not our business; making wine is our business,” she said. “So for us, it was a very challenging idea to work with the FSC standard to certify the forest management that we have in the natural forests surrounding our wineries.”

However, it was increasingly apparent to the company that these forests were providing them with important services, such as regulating the water cycle, preventing erosion, and providing biodiversity that helped with pollination and pest control. So, they signed up to FSC’s ESP, with great results. “It was able to provide us not only with protection of the forest, but also a better relationship with the local community,” said Lira, “and compliance for our commitment to being a [carbon] net-zero company.”

Esther Rohena, the head of climate finance company South Pole’s Global Expansion and Partnerships division, shared some of her organization’s work as a “one stop shop for climate solutions,” which “leverage(s) our finance through the sale of carbon credits and public buyers to projects which are implemented in collaboration with NGOs, local communities, and forest owners.” For Rohena, providing financial assistance for implementers to gain certification is a critical piece of the puzzle.

Stephen Donofrio, the managing director of Ecosystem Marketplace – a standardized Voluntary Carbon Markets (VCM) end-to-end transparency platform – affirmed the growth in popularity of these kinds of projects. “There’s a demand part of this market that is increasingly seeking what is being called ‘high-integrity credits’,” he said. “Many buyers consider nature-based projects to be very valuable in terms of the benefits that they provide beyond carbon, as well as the climate benefits,” said Donofrio, affirming that buyrs are frequently willing to pay more for these. He also highlighted the importance of ensuring that Indigenous Peoples are “at the table for fair and equitable revenue-sharing from market-based approaches, and are also respected in terms of their support of biodiversity and the other [non-carbon] benefits that they provide.”

While the importance of forest restoration is extremely apparent at multiple levels, Michael Brady, a Principal Scientist at the Center for International Forestry Research – World Agroforestry (CIFOR-ICRAF), warned this is not simply about getting trees in the ground. “We coined the phrase ‘planting the wrong tree in the wrong place – and many are left untended’ to express our concern about the overreliance on tree planting, as opposed to tree managing,” he said.

As such, CIFOR-ICRAF has been working since the 1990s to promote a strategic forest landscape restoration approach, boosting governance, supporting communities, promoting natural regional regeneration as a restoration strategy, and exploring new opportunities for restoration, such as in conjunction with biomass production for energy and livelihoods, and as part of efforts to reduce fire and haze.

Lee White, Gabon’s Minister of Water, Forests, the Sea, and Environment, provided a compelling example of the need to safeguard against illegal deforestation as a starting-point for offering any kind of effective forest-based solutions. Following the revelation in 2017 of a USD300 million-per-year illegal forestry industry in the country, “we had to take drastic action,” said White.

The President declared that all forestry operations in Gabon needed to be FSC-certified by 2022. “We felt that we needed to bring in an international watchdog to validate management practices in order for Gabon to maintain its market share in the future,” he said.

The government is also working on a traceability system that will ensure that QR codes “follow living trees in the forest all the way to destinations outside of Gabon,” said White. It is also modernizing its system to be able to prove that Gabonese timber is legal, carbon positive, biodiversity positive, and socially responsible.


Photo: Production of latex from rubber tree (Hevea brasiliensis) in Thailand. Latex is an important non-timber forest product. By Michael Brady/CIFOR-ICRAF.

COP 27: Are Carbon Markets A Solution To A More Sustainable World Or A New Speculative Bubble?
an EM Strategic Supporter Blog by Livelihoods

9 November 2022 | In this maelstrom, there is a growing interest in “nature-based solutions” as they are called: the fight against deforestation, restoration of natural ecosystems, low-carbon agriculture, oceans, etc. We can be happy to see new players arrive and to see this sector finally taking off and mobilizing private capital to complement public investments. The stakes and needs are such on a global scale that this movement must be strongly supported and encouraged. However, to ensure that this craze for carbon finance contributes to truly sustainable solutions and does not end dramatically with the bursting of a speculative bubble, a certain number of rules must be established and respected. In the approach of COP 27, Bernard Giraud shares some thoughts inspired by his experience with the Livelihoods Funds.

Bernard Giraud
Bernard Giraud, President & Co-Founder of Livelihoods Venture

Reducing versus compensating for carbon emissions? That is not the debate

The first of these rules is that carbon offsetting should not be a substitute for reduction efforts. The priority for each actor, whether private or public, is to engage in a profound transformation towards low-carbon practices. However, no actor can reach the “net zero” objective through reduction alone. Offsetting has therefore an important role to play and it makes no sense to oppose reducing and offsetting. But let’s not fight the wrong battle. The Livelihoods Funds have been investing in large-scale programs since 2009 and deliver significant volumes of certified carbon credits each year to companies that have invested in our funds to offset their unavoidable carbon emissions. Most importantly, the investments made have very significant social and environmental impacts for the local populations. What have we learned over the past decade?

Not all carbon projects are equal

First, not all “carbon projects” are equal. For example, investing in tree planting of a single species over hundreds of hectares certainly allows for the creation of a “carbon sink” and therefore for the acquisition of certified carbon credits. But does such a plantation have the same impact on biodiversity or the living conditions of local populations as an agroforestry project that helps hundreds of producers adopt sustainable agricultural practices? Is it enough to “plant trees” or, more broadly, to create the conditions for these trees to flourish? Does an industrial monoculture plantation have the same value as an investment in the preservation or restoration of a forest that is a living ecosystem rich in biodiversity? From a purely economic or carbon storage point of view, these projects can compete. Yet their impacts are very different. Looking at a project solely from the point of view of carbon yield or financial profitability can lead to dramatic errors. Because we are faced with the need to deeply transform our current production systems. This transformation must consider the diversity of environmental and social issues.

The projects supported by the Livelihoods funds succeed because they are based on the aspirations of the local rural communities. They contribute to environmentally sustainable solutions but also to improving the living conditions of farmers and their families. These systemic transformation projects are obviously more complex to design and implement. They require quite a specific know-how, a long preparation with competent teams and high-quality partners. They require time and finding the means to accompany this transformation over time. They require the courage to invest and take certain risks to provide the financial resources that poor rural communities often lack.

A systemic transformation of farming models

A major challenge for carbon finance is how it can contribute to the transformation of agriculture to meet both food and environmental needs. In the North, how can we support modern farms in their transformation to low-carbon agriculture, which restores soil fertility and biodiversity while maintaining a good level of production per hectare? In the South, how to support the hundreds of millions of smallholder family farms to ensure a decent income through agricultural practices that do not lead to the destruction of the still available natural resources?

The Livelihoods Funds work with companies that process agricultural raw materials for food or other products. These companies have recognized the need to support these transformations upstream of their industrial and commercial activities. More and more of them are setting targets for tonnages and hectares converted to regenerative agriculture practices. This necessary shift is complex and fraught with challenges. No single category of actor can make this shift successfully, on their own. We need operational coalitions that allow actors in the food chain to work together on concrete projects in each territory: farmers and their organizations, companies, NGOs, research, public authorities, etc. It is by combining the financial resources and skills of all these actors together that the transition becomes accessible to everyone.

A role assigned to the Governments: defining clear rules and finding the right balance

Since the Paris Agreements, several countries have made commitments to reduce their carbon footprint and most of them are in the process of defining the rules that will apply in their own country for the allocation and transfer of carbon rights under Article 6. The crucial question of solidarity and justice between formerly or recently developed countries with high emissions and developing countries with low emissions and high exposure to the effects of climate change has been at the heart of international negotiations for too many years.

The private funding provided through “voluntary carbon” projects can only be a contribution in addition to state agreements of a completely different scale. But this contribution can be significant for many states by focusing on nature-based solutions projects that are difficult to finance. The efforts of states and private investors in “carbon finance” should not be pitted against each other in sterile debates about “double accounting”. The carbon impacts generated by these projects benefit the territories and populations as much as the investors who took the risk of financing them. It is not a question of opposing approaches but rather of seeking synergies: it is in the interest of governments to attract financing that will enable them to move towards their climate objectives, and investors need a defined framework and clear rules to secure their rights.

Separate the wheat from the chaff

But which type of investments? If we look at the mainly financial motivations of some “carbon finance” players and their desire to simplify and focus solely on obtaining carbon credits, we can fear that the cure is sometimes worse than the disease. With the risk of discrediting carbon projects altogether. Therefore, we believe it is essential to encourage a segmentation of this market so that buyers of carbon credits can identify the real value of what they are buying. The Livelihoods Funds therefore support the efforts of standards and all stakeholders who are committed to carbon projects with high environmental and social value. It remains to succeed in this effort of differentiation without falling into the trap of multiplying complex standards and heavy bureaucratic processes that would weigh down projects, mobilize the energy of actors on the ground and increase costs to the detriment of action.

We are convinced that carbon finance can be a factor for progress if it supports projects that are truly transformative. It can help mobilize financial, technical, and human resources for large-scale projects over long periods. Let’s make sure that the “good wheat” does not get mixed up with the “bad wheat”.

This blog was originally published on the Livelihoods website.

World faces a major “Gigaton Gap” on finance for forests, new research says

To get back on track to meet global 2030 targets for forests, a new study is calling for a “bold” new public and private commitment to a floor price of $30-$50 per ton for high-integrity forest carbon credits, and accelerating upfront finance to forest countries for REDD+.

  • A new report finds that for 2030 forest goals to remain within reach, we need to achieve the milestone target of one gigaton milestone of emissions reductions from forests by 2025, plus another gigaton yearly after that.
  • We are not on track to meet this milestone. Just one-quarter of the necessary commitments have been made to date, and only half of these of these commitments have reached the stage of signed emissions reductions purchase agreements. And none of the committed funding has yet been disbursed.
  • Report authors also call for more direct carbon finance to Indigenous groups and women.

November 7, 2022 / A report released today by the UN-REDD Programme, UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) and the Green Gigaton Challenge (GGC) says finance for forests is still insufficient to keep global warming below 2 degrees Celsius, the primary goal of the Paris Agreement.

Its authors call for a strong forest carbon price signal and more upfront finance to encourage countries to invest more in forest protection.

The COP27 climate talks, which began yesterday in Sharm El Sheikh, Egypt, are continuing last year’s talks in Glasgow, Scotland, an event marked by a slew of high-profile climate commitments from governments, companies, investors, and philanthropy.

The Glasgow Leaders’ Declaration on Forests and Land Use was one such pledge. One hundred and forty-one countries representing more than 90 percent of the Earth’s forests signed on to “halt and reverse forest loss and land degradation by 2030” while at the same time transforming rural economies and promoting sustainable development. Signatories emphasized forests’ crucial role in climate change mitigation, and the need to ratchet up ambition: at present, countries’ existing commitments to cut emissions fall 15 gigatons per year short of what’s likely needed by 2030 to limit global warming to no more than 2°C. Forests can help close that gap by an estimated four gigatons. But the window to act is closing.

“The window is closing” to meet 2030 targets for forests

The Green Gigaton Challenge coalition has proposed an interim milestone of financing commitments to deliver one gigaton of emissions reductions from forests by 2025, and another gigaton yearly after that. Meeting this milestone would keep the 2030 target within reach.

But report authors say we are still falling short. Just one-quarter of the necessary commitments have been made to date, and only half of these of these commitments have reached the stage of signed emissions reductions purchase agreements. And none of the committed funding has yet been disbursed.

“We are running out of time to achieve the urgent milestone of achieving commitments for one gigaton of emissions reductions from forests by 2025,” said Judith Walcott, Senior Safeguards Specialist at UNEP-WCMC and lead author of the new report.

“There is no Paris Agreement and no Sustainable Development Goals without forests,” said Susan Gardner, Director, Ecosystems Division, UNEP, speaking on behalf of the Green Gigaton Challenge. “As UNEP’s Emissions Gap Report reminded us once again, the window is closing and we urgently need to scale up action and finance for forest-based mitigation to achieve the 2025 one gigaton milestone and avert catastrophic climate change. If we succeed, and the new Forest and Climate Leaders Partnership is a promising sign of ambition, then vital targets for climate and nature remain within reach.”

Higher carbon credit floor prices and more upfront finance needed

To close the “Gigaton Gap,” report authors say “an unmistakable incentive in the form of an increased forest carbon price is needed… A bold first step, like committing to a floor price of $30-50 per ton of CO2e for a substantial volume of emissions reductions, would empower forest countries to transform their economies and catalyze further funding opportunities.”

The report also calls on the climate finance community to ensure that forest countries have “straightforward access” to upfront finance enabling them to prepare for and implement actions to reduce emissions from deforestation and degradation, which would then allow them to receive results-based payments for emissions reductions, via a mechanism known as REDD+ which is overseen by the United Nations Framework Convention on Climate Change.

“Currently, finance for forests does not reflect the urgency or the scale of the problems we are facing. Upfront investment in REDD+ readiness and implementation must continue and be scaled up to ensure capacity and action to achieve emissions reductions results, with effective measurement, verification and reporting systems and safeguards in place,” said Andre Guimaraes, Executive Director, Amazon Environmental Research Institute (IPAM).

The report finds that even if countries make it past early hurdles, few long-term, predictable options to access results-based financing exist. Authors documented at least $1.7 billion committed to pay for emissions reductions between 2020-2025 at the jurisdictional scale (Table 1). Just over half of this are Emissions Reduction Purchase Agreement (ERPAs) signed with the Forest Carbon Partnership Facility’s Carbon Fund. Another quarter of total commitments have been made through the LEAF Coalition. And commitments made in the form of either a Joint Declaration of Intent or Letter of Intent comprise the remainder.

Additional upfront readiness and implementation finance could be secured not only from traditional bilateral and multilateral sources, but also through blended public-private instruments and from private financial institutions such as pension funds and philanthropic institutions, which authors say are in a better position to provide long-term financing than private sector corporations or national governments. Green bonds and debt-for-nature swaps are other possible sources of finance.

The report also notes that voluntary carbon markets will have a role to play. Ecosystem Marketplace data cited in the report show that nearly $1.7 billion in transactions for forestry and land use projects took place in 2021 in the voluntary markets, representing more than 285 million tCO2e.

“No progress without equity”

Once finance is mobilized, it will be crucial to have strong integrity mechanisms and safeguards in place to ensure that emissions reductions are achieved.

“With serious action and incentives, we can get there, but progress also hinges on equity – fair and inclusive access to funding and capacity building. This will be crucial to achieving forest-centered emissions targets,” says Walcott.

“There is no progress without equity. Indigenous peoples and local communities are on the front line, leading the way with conservation and sustainable management of forests, but their lives are often at risk. Direct access to funding at sufficient volumes should be guaranteed for indigenous peoples and local communities as true partners, and with a focus on women”, said Lola Cabnal, Asociación Ak’Tenamit.

Forests key to “flattening the curve” of decarbonization costs

Ultimately, the price per ton paid under REDD+ mechanisms isn’t high enough, according to the report. Current prices range from $5-10 per tCO­2e, which the GGC says are too low to effectively function as an incentive for forest protection when lined up against revenue flows from alternative land uses like clearing for agriculture.

They call on public and private climate funders to commit to a floor price of $30-50 per ton of CO2e.

“This commitment would incentivize investment to help overcome the barriers of achieving sustainable development alongside forest mitigation,” report authors write. “The public demand signal would also provide reassurance to private actors and catalyze their further (and scaled up) commitments to pay for emissions reductions. An attractive price of forest carbon combined with reasonable certainty of future payments would also go a long way to attracting upfront finance for REDD+.”

Such a major jump in forest carbon credit prices is still a bargain compared to alternative emissions reductions strategies.

“REDD+ can contribute trillions of dollars in value by ‘flattening the curve’ of the global economy’s costs of transition to climate stability—opening up the opportunity to achieve tighter emissions targets and to maintain total emissions consistent with a 2°C budget while keeping the global carbon price below $250/tCO2e by 2050,” writes Rupert Edwards, Senior Finance and Carbon Advisor at Forest Trends, a founding member of the GGC. “Without the higher end of REDD+ supply potential, any tightening of ambitions would lead to a quick escalation in carbon prices.”


The report and its findings will be presented on November 11, 3:30pm at the Nature Zone event “Making good on the Glasgow Climate Pact: a call to action to achieve one gigaton of emissions reductions from forests by 2025”.


Editor’s note: Ecosystem Marketplace is an initiative of Forest Trends, a founding member of the Green Gigaton Challenge. Forest Trends and Ecosystem Marketplace contributed analysis and review to this report.

9 Things to Know About National Climate Plans (NDCs)

Please note this article was originally published by the World Resources Institute: https://www.wri.org/insights/assessing-progress-ndcs

As countries prepare to gather at COP27 in Sharm el-Sheik, Egypt to advance the Paris Agreement on climate change, attention turns once again to its building blocks: countries’ 2030 climate commitments, known as nationally determined contributions (NDCs).

While the Paris Agreement established three global goals — limit global temperature rise to well below 2 degrees C (3.6 degrees F) and ideally 1.5 degrees C (2.7 degrees F), promote adaptation and resilience, and align financial flows with low-emissions, climate-resilient development — NDCs are the foundation. In its NDC, each of the Paris Agreement’s 194 Parties must lay out its aims to reduce emissions. Many also include plans for adapting to climate impacts and the financial requirements needed for implementation.

Countries must strengthen their NDCs on a regular, five-year cycle. Most submitted their initial commitments in 2015 and updated them by 2021. A new, stronger round of NDCs is due in 2025.

WRI’s Climate Watch platform tracks more than 200 indicators on all NDCs. The new State of NDCs report analyzed this data to draw out key trends and evaluate where the NDCs now stand. The key takeaway? Countries are making incremental progress on strengthening their NDCs, but what we really need to achieve the goals of the Paris Agreement is urgent transformational change.

Here’s what we know and what countries should keep in mind as they formulate new NDCs by 2025:

1) Despite some progress, countries must reduce emissions at least 6 times as much as current pledges.

The Intergovernmental Panel on Climate Change (IPCC) finds that global emissions must fall by at least 43% from 2019 levels by 2030 to align with the 1.5-degree C goal. By contrast, the current NDCs will only reduce global emissions by about 7% from 2019 levels. While this represents a 5.5 GtCO2e reduction compared to the initial NDCs — nearly equivalent to eliminating the annual emissions of the United States—countries will need to reduce emissions by 6 times as much to align with 1.5-degree C pathways.

While more countries have now set GHG reduction targets than in the initial NDCs and countries have expanded their targets to cover more sectors and types of greenhouse gases, the emissions impact of these improvements has been modest.  More than 85% of the improvement has come from large countries ratcheting up the stringency of their targets as opposed to adding new targets or expanding targets to cover new sectors and gases. Finding ways to accelerate ambition is paramount to the success of the Paris Agreement.

Mitigation Ambition in New and Updated NDCs Relative to Initial NDCs

2) Countries are strengthening adaptation plans, but progress must speed up and expand.

In the current round of NDCs, countries nearly doubled the number of priority adaptation actions compared to their initial NDCs. These actions show improved coverage of sectors and systems for adaptation, with a strong focus on food and nutrition security, water and nature-based solutions. Current adaptation plans also include a stronger emphasis on equity than previous NDCs, with greater consideration of gender concerns and inclusion of Indigenous Peoples.

Yet more work needs to be done to implement adaptation at the speed and scale the climate crisis demands. Few countries’ NDCs include timeframes or indicators for implementation of adaptation plans, and less than half of current NDCs include adaptation monitoring, evaluation and learning, elements critical for ensuring that planned interventions translate into on-the-ground action.

Time Frames and Indicators Identified for Priority Adaptation Actions in the NDCs

3) Current levels of climate finance are insufficient for implementing even a subset of NDCs. 

While countries are not required to report their climate finance requirements in NDCs, 53% (89 countries representing 50% of the global population), all of which are developing countries, included an estimate for how much money they’ll need to implement their plans. These countries say they’ll need $4.3 trillion: $ 2.7 trillion for mitigation; $1.1 trillion for adaptation; and $475 billion unspecified.

Importantly, 51 countries’ stated needs amount to a total of $1.5 trillion to achieve their “conditional” NDC pledges, those contingent on receiving international finance to implement mitigation and adaptation plans. This figure dwarfs the promise by developed countries to provide $100 billion annually to developing countries by 2020 to support their climate actions — a target they’ve yet to meet. A new collective finance goal to go into effect after 2025 is currently under negotiation. Finance estimates from the 89 countries providing them underscore the need to mobilize significantly greater resources to implement NDCs.

Climate Finance Requirements in Current NDCs

4) Around 50% of developing countries include loss and damage in their NDCs.

Roughly the same number of countries refer to current or future costs of loss and damage — the consequences of climate change that go beyond what countries can adapt to — in their current NDCs compared to the first round. However, more countries are including information on loss and damage topics, such as slow-onset events, climate-induced migration, and provision of finance and capacity-building for loss and damage. This suggests that countries may prioritize elements of loss and damage even if they do not include cost figures in their NDC.

Additionally, Small Island Developing States (SIDS) are increasingly including loss and damage costs and related topics in their NDCs, suggesting that the most climate-vulnerable countries are prioritizing this information. Additional support for countries to analyze trends in loss and damage — including use of climate scenarios — and approaches for addressing it such as comprehensive risk management could improve this information in future rounds of NDCs.

References to Loss and Damage in the NDCs

5) 81% of NDCs seek to increase renewable energy, but few explicitly aim to reduce fossil fuel consumption.

In addition to economy-wide targets to reduce greenhouse gas emissions, most NDCs contain sector-specific measures. Those promoting renewable energy are among the most popular – 136 NDCs contain measures to boost renewable power, and more than half of these contain quantified renewable energy targets.

But limiting warming to 1.5 degrees C also requires slashing fossil fuel consumption dramatically, and far fewer NDCs explicitly address this. Only 51 contain measures pertaining to fossil fuel consumption, and a mere eight contain measures to phase out or phase down fossil fuel consumption.

Number of NDCs with Different Types of Renewable Power Generation Measures

6) Most NDCs include measures addressing forests and land use, but quality varies.

More than 140 NDCs contain measures to protect standing ecosystems, manage working lands to reduce emissions and/or restore degraded ecosystems. Seventy-eight NDCs contain measures in all three categories.

The quality of these measures, however, varies widely. Only just over half of NDCs have quantifiable targets related to land use and forestry, and very few incorporate critical measures such as financial needs and the rights of Indigenous Peoples and local communities.

NDCs Containing LULUCF Targets and Measures

7) NDCs prioritize electric mobility but don’t include other critical measures to reduce transport emissions.

A holistic approach to reducing emissions from transport includes avoiding unnecessary vehicle travel, shifting to efficient travel modes, and improving vehicle and fuel efficiency. The current NDCs have embraced vehicle improvements by promoting electric transport. Such measures more than doubled from the initial to the current NDCs.

The enthusiasm for electric mobility, however, was not matched by growth in other critical transport-related measures. Less than half of NDCs contain public transport measures. And active transport and low-carbon freight, shipping and aviation appear in only a handful of NDCs.

The next round of NDCs should ensure balanced attention to measures that avoid unnecessary travel, shift to sustainable travel modes, and improve vehicles, taking into account both passenger and freight sources.

(Learn more about transport in NDCs in WRI’s research paper, Sustainable Urban Mobility in the NDCs: The Essential Role of Public Transport.)

Number of NDCs Containing Different Types of Transport Measures

8) Only 15 of the 119 Global Methane Pledge signatories include a specific, quantified methane-reduction target in their NDCs.

Countries committed to the Global Methane Pledge, launched at COP26 in Glasgow in 2021, agreed to collectively reduce global methane emissions by 30% from 2020 levels by 2030. While around 80% of signatories include methane under the umbrella of their economy-wide GHG reduction targets, far fewer (only 15) include quantified methane-specific targets in their NDCs. This makes it challenging to determine how the collective Global Methane Pledge target will be met.

The next round of NDCs offers an opportunity for Global Methane Pledge signatories to spell out how they will contribute to the collective 30% reduction in methane emissions by 2030.

Methane Coverage in the NDCs from Global Methane Pledge Signatories

9) NDCs increasingly recognize the importance of a just transition.

As support for just transitions rise up the agenda for the UNFCCC, so too has its recognition in countries’ NDCs. The idea of a “just transition” is to reduce the negative impacts on workers, communities and value chains of transitioning to a zero-carbon economy while also ensuring that the benefits are fairly distributed.  Explicit attention to the idea in the initial NDCs was almost non-existent, only appearing in South Africa’s plan. In the current NDCs, 32 mention a just transition, although at varying depth. Some briefly mention the concept — such as Mauritius and Iceland — while other parties —such as South Africa, Antigua and Barbuda — have more fully incorporated the concept, with paragraphs or dedicated sections on just transition. The next round of NDCs, in addition to national policies, can spell out these efforts more fully.

The First Year in Which Countries Mentioned "Just Transition" in Their NDCs

What’s Next for Countries’ Nationally Determined Contributions (NDCs)?

As agreed at COP26 in Glasgow, countries are expected to continue strengthening their NDCs this year. But in the lead-up to COP27, progress appears to have reached a plateau.

As countries develop new plans in advance of 2025, it will be important to deliver not just incrementally more ambition, but an entirely different scale of ambition and a clear sense of the transformations countries will pursue.


Shades of REDD+
Beyond carbon – evaluating the sustainable development co-benefits of carbon projects

11 October 2022 | Thousands of carbon projects claim to positively contribute to SDGs beyond reducing or removing greenhouse gas (GHG) emissions. However, until very recently, there was no way to assess such claims and compare carbon projects according to their positive contribution to SDGs. In this context, Calyx Global’s SDG rating of carbon projects is marking a milestone toward a carbon market that values GHG mitigation and the broader co-benefits of carbon projects.

As of October 2022, Calyx has reviewed 117 projects with certified SDG contributions and can report the first findings. For example, projects that involve communities and focus on nature-based solutions show a higher likelihood of additional SDG impacts. Projects that are often more time-consuming to implement because they focus on improving livelihoods, in addition to climate challenges, are also more likely to generate additional SDG outcomes. The SDGs – other than SDG13 on Climate action- that are claimed most often by projects are SDG8 (Decent work and economic growth) and SDG15 (Life on land). While it is not surprising that projects that promote nature-based solutions claim SDG15 outcomes, the contribution of carbon markets to job creation is a little-known fact. Projects also use different methodologies to assess and report on SDG contributions, with cookstoves projects being more likely to follow a clear methodology to quantify outcomes (SDG 3 Good health and well-being) than other project types.

Why quantify SDG contributions of carbon projects?

The driver behind investments into carbon projects is the intent to generate GHG emission reductions and removals. The quality of carbon projects is first and foremost measured by how effectively they reduce or remove GHG emissions. High-quality carbon projects must also avoid harm to the planet and people. However, taking such a narrow view of carbon projects disregards the multi-dimensional positive impacts carbon projects can have on societal well-being and the planet. Limiting carbon projects to reducing emissions is like limiting agriculture to producing calories: Without considering agriculture’s many roles – such as ensuring prosperous livelihoods and landscapes, healthy soils and biodiversity, humanely-treated animals, and nutritious and balanced food – much of its essence, value and beauty is lost.

Sustainable carbon projects with long-term positive impacts take an integrated view across multiple outcomes. They maximize benefits ranging from reducing poverty and ensuring access to clean energy and water to enhancing biodiversity and coastal ecosystems. Projects that score high across multiple SDGs yield significantly more benefits than simple carbon projects. Such projects may often be more expensive in their design. Still, they are likely to enjoy broader support in local populations and thus be sustained much longer. In other words, they are more worthwhile projects that require additional investments.

Calyx Global’s rating of SDG contributions of carbon projects is also in line with proposals by entities such as the Integrity Council for Voluntary Carbon Market (IC-VCM) to tag carbon credits to highlight particular features of carbon credits. The IC-VCM consultation draft also requires carbon-crediting programs to incorporate guidance and provisions on using standardised tools and methods to assess the SDG impacts of mitigation actions and ensure a net positive SDG impact from carbon projects.

Who certifies SDG-related claims?

Calyx Global provides an SDG impact rating for projects that distinguish themselves by receiving an SDG certification through, for example, Verra’s Climate, Community and Biodiversity or Sustainable Development Verified Impact standards or the Gold Standard for Global Goals. These carbon-crediting programs offer a process for projects to measure and report SDG outcomes, including validating, monitoring, and verifying such outcomes. While most projects choose the route of attaching an SDG “label” to a carbon credit, both Verra and Gold Standard also offer, in theory, issuance of tradable SDG assets.

The credibility of SDG-related claims depends greatly on the credibility of the certifying standard and its governance – which constitute a logical first step for Calyx’s review of SDG claims. However, in the end, the SDG merits in scale and depth are project and investment-specific. Therefore, assessments of SDG impacts must look at each project individually and value SDG contributions at a granular level – while applying a standardized assessment methodology.

How to assess projects’ contribution to SDGs?

Calyx Global has developed a project-level SDG assessment that identifies SDGs to which a project claims to have contributed and assesses the degree to which these contributions can be attributed to the project as well as the depth and durability of those contributions. SDG contributions are tangible actions that projects claim, report on, and verify by third-party audits. Providing such a rating of projects according to their SDG contributions requires a standardized evaluation of claims that relate to nature, ecosystem, and well-being across an infinite diversity of project contexts.

This evaluation is not an easy task and has to overcome several challenges. A first barrier is the country-centric nature of UN SDG targets and indicators that were developed and are mostly measured at a global and national level. They are not always aligned with project-level interventions. It was, therefore, essential for Calyx Global to relate project activities to SDG targets. The chosen methodological approach allows mapping project interventions and activities to SDG targets to determine under which SDGs a given project’s contribution can be framed.

Calyx Global’s project assessment framework has been developed in reference to a methodology that Robert Müller and Thijs Merton have developed for the Fair Climate Fund. It rests on two pillars that ensure that projects make long-term contributions to SDGs:

  1. The benefit project claims can be attributed to the project activities. The level of assurance that a specific SDG contribution has occurred due to project activities depends on two factors. First, the contribution is predicted or actual. Second, it is described, estimated, or quantified using a clear methodology. The assessment framework checks if this is the case for each SDG contribution by a project.
  2. The benefits brought about by projects are deep and durable. For each SDG contribution identified, the assessment evaluates the level of change achieved by the project. In project results chains, project activities may lead to outputs, i.e. services or products delivered. These services or products can improve people’s lives and planetary health if they are taken up and used. Calyx evaluates whether the reported project contributions are at the level of output, outcome or impact hence gauging the long-term benefits of the project and its contribution to sustainable development.

The figure below summarizes the assessment methodology.


Approach to assessing and rating SDG contributions at the project-level

What remains to be done?

While Calyx is pioneering SDG ratings, more remains to be done to fully capture the SDG value of projects. For one, it is hard to assess the SDG impact of carbon projects until projects have reached a certain maturity. Another challenge is differentiating between SDG outcomes and impact at scale (i.e. impact per credit) and smaller-site specific SDG results. In many cases, the information provided by project developers also is scant, with gaps that make assessing outcomes difficult. Standards that certify SDG claims can do more to ensure their clarity and quality. For example, they can introduce more robust methodologies for baseline assessments, quantifying SDG impacts, and requirements and guidance for projects monitoring and reporting impacts.

Where are we hoping to take this?

A mature carbon market should be able to trade and value attributes beyond carbon. Indexed assets that standardize SDG contributions will allow buyers to formulate purchase orders with a minimum level of rated SDG contribution, which will help channel investments into projects that maximize carbon and SDG benefits. In this context, a robust SDG rating can help increase the overall confidence in carbon markets. Host countries will feel more confident about the local benefits of carbon projects. Buyers can reduce reputational risks. Most importantly, local community and ecosystems can fully enjoy their participation in global carbon markets.

The authors of this blog form part of Calyx Global’s independent oversight through its independent panels. The SDG Impact Panel brings together experts, including academics and practitioners, on climate change, carbon projects, and sustainable development to combine their knowledge and guide the SDG assessments of Calyx.

London Stock Exchange Launches its Voluntary Carbon Market Rules

10 October 2022 | After nearly a year since first announcing that it would be developing a new market solution to accelerate the availability of financing for projects that will support a just transition to a low-carbon economy, the London Stock Exchange today launched its public market framework. The Exchange’s goal is to stimulate the scaling of the global voluntary carbon market through capital at scale and transparency through disclosure.

According to the London Stock Exchange Voluntary Carbon Markets website, the “Voluntary Carbon Market will enable funds and operating companies to raise capital to be channelled into projects that contribute to reducing the amount of greenhouse gases in the atmosphere, both nature-based and technology led, and that are expected to generate carbon credits… [it] is designed to support corporates who seek to offset their residual or unavoidable emissions on their net-zero journey and provide exposure for investors to an asset class, with a long-term supply of carbon credits.”

What is the Voluntary Carbon Market designation?

The designation may be applied to qualifying Funds or Operating Companies that are admitted to the Main Market or AIM and are intent on investing into climate change mitigation projects that are expected to yield carbon credits.

How will London Stock Exchange’s Voluntary Carbon Market work?

Watch this explainer video

Learn more with the factsheet: https://docs.londonstockexchange.com/sites/default/files/documents/VCM-facsheet-october-2022.pdf
Access application forms, admission and disclosure standards: https://www.londonstockexchange.com/raise-finance/equity/voluntary-carbon-market

Decarbonizing and de-risking commodity supply chains: It’s a package deal

Corporate commitments to eliminate deforestation from commodity supply chains really took off in 2014 with the New York Declaration of Forests. It had become increasingly clear that commercial agriculture – namely soy, palm oil, cattle, and timber – was behind the majority of deforestation. Today, anti-deforestation commodity commitments cover $96.8B in export value.

In parallel, net zero emissions commitments by companies have also surged. Thousands of companies and financial institutions have pledged to halve emissions by 2030 and reach net zero by 2050.

These two sets of commitments evolved separately, and have tended to be managed separately, even by companies that have pledged to achieve both zero-deforestation supply chains and net zero emissions targets.

New guidance released today brings the two together, for aligned corporate action on deforestation and land use change emissions.

From a practical standpoint for companies, it makes a great deal of sense to link these two issues. The authoring organizations, the Accountability Framework initiative (AFi), the Science Based Targets initiative (SBTi), and the Greenhouse Gas Protocol (GHG Protocol), rightly point out that addressing deforestation and emissions related to land use change “both require companies to follow the same set of processes: i. setting goals and targets to eliminate land use change associated with their operations and supply chains; ii. measuring and accounting for that land use change at multiple scales; and iii. disclosing performance and progress.”

It also makes sense in terms of moving the needle on emissions: as much as 90% of a company’s carbon footprint comes from its “Scope 3” emissions. (Scope 3 emissions are from activities or assets a company doesn’t have direct control over in its value chain, like upstream sourcing and downstream consumption. Scope 1 emissions are direct emissions; Scope 2 are from emissions from energy use.)

Scope 3 emissions have long been the “dark matter” of climate disclosure. We just released analysis showing that though they make up the vast majority of emissions, less than half of companies report data on Scope 3, leaving a major gap in understanding and reporting climate impacts associated with land-use change.

Historically Scope 3 emissions have been overlooked – until now.

Expect to hear a lot more about Scope 3 in the coming months. Investors are starting to focus on them and ask companies for more data. The International Sustainability Standards Board and the US Securities and Exchange Commission have recently drafted disclosure requirements for Scope 3. (Though Republicans are pushing to scrap the SEC disclosure requirements on the grounds that reporting on Scope 3 is too complex.)

Action on Scope 3 would have enormous impact for climate and ripple across the global economy. (One company’s Scope 3 emissions are another’s Scope 1 emissions after all.)

Since deforestation upstream in the value chain is behind such a large share of Scope 3 emissions for everyday consumer goods, action on Scope 3 is also a very, very big deal in the fight to protect forests and other carbon sinks.

We remember well the energy in New York in September 2014 during Climate Week, when the New York Declaration on Forests was launched with great excitement. The NYDF pledged signatories to halving deforestation in supply chains by 2020, and eliminating it by 2030. Virtually no one achieved the 2020 goal. We all underestimated how difficult it would be.

Now we are realizing that climate safety and protecting our planet’s forests are a package deal. We’ll achieve both, or neither.


Opinion: ESG falling short? Low carbon funds overvalued? High integrity carbon credits offer a bridge to net zero finance

  • Carbon credits can provide flexibility for more efficient and impactful use of capital where low carbon portfolios are overvalued or if ESG strategies are failing to deliver meaningful climate change mitigation. 
  • The financial sector’s transition to net zero should include widespread use of high integrity carbon credits (1), as a supplement to robust decarbonization targets for investment and lending. 
  • High integrity carbon credits provide opportunities for Financial Institutions to optimise the financial performance and environmental impact of carbon constrained portfolios and net zero strategies. 
  • Supporting natural climate solutions through the voluntary carbon markets enables Financial Institutions to act as a direct transmission mechanism for achieving the goals of the Paris Agreement. 

Finance’s net zero conundrum 

The Paris Agreement’s Article 2.1(c) describes “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” However, efforts by Financial Institutions (FIs) to decarbonize portfolios are hamstrung by their inability to exercise direct control over the greenhouse gas emissions of companies to which they provide finance. 

FIs have some tools at hand: they can engage with companies and advocate for regulatory changes to push for progress on low carbon goals.  And the Science-Based Target Initiative (SBTi) is developing standards for sectoral decarbonization, portfolio coverage and temperature ratings that will allow for evaluation of “net zero by 2050” pledges.(2

The concept of the “value-carbon frontier” 

However, the fiduciary responsibility to maximise returns means that institutional investors inevitably struggle to decarbonize investments beyond a level implied by the efforts of public policy and the real economy. As the UN Convened Net-Zero Asset Owner Alliance has stated: “To achieve net-zero investment portfolios by 2050, governments [emphasis added] must implement policies that drive the transition to a low-carbon economy.”(3)

Constructing net zero portfolios by tilting towards low-emitters and those best-in-class carbon-intensive companies transitioning to net zero has also been easier said than done. From 2016 through 2020, MSCI found that that less than a quarter of MSCI ACWI Investable Markets Index constituentsdecarbonized by at least 10% per year, making it virtually impossible to build broad global equity portfolios of decarbonising companies during this period, and thus raising difficult questions around accountability for achieving targets.(4)

Research from Dutch asset management firm Robeco has demonstrated empirically how attempting to increase carbon footprint reduction beyond a certain level has an adverse effect on the performance of a value investment portfolio strategy. They showed that carbon taxes up to US$100 per metric ton of CO2 equivalent, corresponding mathematically with a portfolio carbon footprint reduction of about 50%, had little effect on the characteristics and the performance of the long side of an EBITDA/EV value strategy for MSCI World stocks. However, to increase the carbon footprint reduction to 70%, the assumed carbon tax would need to rise from US$100 to an unrealistic ~US$5,000.(5) 

There are, therefore, real economy constraints which result in a “value-carbon frontier” beyond which reducing the carbon footprint sacrifices financial returns in a broad-based investment portfolio. 

When ESG fails to deliver and low carbon funds are over-valued 

ESG funds (as opposed to low carbon funds) have faced a barrage of criticism in recent months, from the mild: that the acronym ESG jams together disparate and sometimes contradictory objectives;(6) to the damning: that the sector is rife with greenwashing and at risk of a miss-selling scandal,(7) or that funds offer little if any environmental benefit and cause actual harm by misleading investors into thinking they are addressing climate change when they are not.(8) 

Genuinely low carbon strategies and investing directly in climate solutions are, of course, an effective way to reduce carbon footprints and to allocate capital to climate change mitigation. They do, however, concentrate risk in a small number of sectors, thus risking financial underperformance.  Forest Trends argued in February 2021 that while continued climate policy tightening should create a positive secular trend for low carbon investments, low carbon strategies could become expensive (either because policy is insufficiently ambitious or because flow of funds into low carbon products drives valuations too high).  

Since then, clean energy indexes have underperformed dramatically compared to the traditional energy sector: a 17.39% loss for the MSCI Global Alternative Energy Index in 2021 compared to an increase of 41.77% for the MSCI World Energy Index and 22.35% for the MSCI World Index.(9) JPM Asset Management’s Annual Energy Review for 2022 expected this trend to continue through 2022.(10) And in the year to 31st August 2022, the Global Alternative Energy Index was down 7.4% compared to an increase of 35.7% in the World Energy Index. 

High integrity carbon credits as a bridge to net zero 

Both investment managers and retail investors need the flexibility to switch out of green assets if they perceive them to be overvalued. Moreover, the sectors where emissions are hard to abate remain critical to economic growth and the transition to a carbon neutral economy. Investments in some carbon-intensive companies represent both an opportunity to finance businesses leading the way to net zero and at the same time achieve superior returns. In these scenarios investors can hold more carbon intensive portfolios and pay for credits to maintain the same carbon footprint or pay extra to achieve net zero today.(11)

The table below shows the emissions (Scopes 1, 2 and 3) associated with a range of MSCI indexes measured as tons of CO2 equivalent per $ Million of Enterprise Value including Cash (EVIC), as at the end of August 2022. At what would currently represent a high carbon credit price of US$20, the leading MSCI ACWI index would cost 0.77% per annum to offset, the Global Alternative Energy Index 0.30% and the World Energy Index a much higher 5.15%.

However, the World Energy Index outperformed the Alternative Energy Index by 59% in 2021 and 43% in the year to 31st August 2022. Assuming a carbon credit price of $20 tCO2e, the outperformance in 2021 would have been sufficient to fully offset the difference in carbon footprint between the two indexes for fourteen years and the outperformance in the last twelve months sufficient to offset the difference for around nine years. 

Carbon credits can therefore be used both to achieve net zero earlier than 2050 and to optimise the financial performance of carbon constrained investment strategies, representing a more efficient and impactful use of capital if low carbon portfolios are overvalued or if ESG strategies are failing to deliver meaningful climate change mitigation versus non-ESG benchmarks. 

The potential of financial institutions as a direct transmission mechanism for Paris goals  

High integrity carbon credits can allow FIs not only to follow corporate best practice but directly to support critical climate change mitigation actions.  

It will be impossible to stabilize global warming below 2°C without offsets and negative emissions such as Natural Climate Solutions (which offer up to 30% of the GHG mitigation required).(12) Commitments to pay for carbon credits from FIs (as well as corporates) could enable donor governments and multilateral institutions to leverage massively more private co-funding for climate aid in developing countries and to unlock high integrity credit supply pipelines through initiatives such as the LEAF Coalition.(13)

The Natural Climate Solutions Alliance convened by the World Economic Forum and the World Business Council for Sustainable Development has developed an NCS Investment Accelerator, supported by several corporates, which aims to go beyond internal decarbonization trajectories by investing in high integrity credits to offset residual emissions on an annual basis.(14)  FIs and their ethically oriented clients can do the same. Indeed, use of carbon credits by FIs would reinforce competitive pressure for corporate action, not least because FIs would have no need to offset the carbon footprint of investee companies which have already offset emissions beyond their value chain.  

Supporting the development of a liquid market in high integrity carbon credits could allow FIs to go beyond the “value-carbon frontier” in global financial markets implied by policy signals in the real economy, and to act as a direct transmission mechanism for achieving the goals of the Paris Agreement. 


(1) For detail on what constitutes “high integrity” see:
The Tropical Forest Integrity Guide https://tfciguide.org/wp-content/uploads/2022/07/TFCI-Guide-English.pdf
The Integrity Council for the Voluntary Carbon Market https://icvcm.org/
(2) Financial Sector Science-Based Targets Guidance Version 1.0 February 2022. https://sciencebasedtargets.org/resources/files/Financial-Sector-Science-Based-Targets-Guidance.pdf
(3) UN Convened Net- Zero Asset Owner Alliance. Position Paper on Governmental Carbon Pricing. June 22
(4) MSCI. Constructing Net-Zero Portfolios: Three Approaches. September 2021. https://www.msci.com/www/blog-posts/constructing-net-zero/02768215423
(5) Robeco. December 2021. Factoring carbon taxes into a Value strategy
And see: Blitz, D., and Hoogteijling, T., November 2021, “Carbon-tax-adjusted value”, working paper.
(6) Financial Times. Jonathan Guthrie. April 2022. ESG is a category error that needs unbundling
(7) Financial Times. Laurence Fletcher and Joshua Oliver. February 2022. Green investing: the risk of a new mis-selling scandal
https://on.ft.com/3s3UHUu ; https://on.ft.com/3Nu8r3m
(8) Tariq Fancy. The Secret Diary of a Sustainable Investor.
(9) https://www.msci.com/documents/10199/de6dfd90-3fcd-42f0-aaf9-4b3565462b5a; https://www.msci.com/documents/10199/40bd4fec-eaf0-4a1b-bfc3-8ed5c154fe3c
(10) JPMorgan Asset Management Annual Energy Review 2022
See also
It’s Not Easy Being Green: Why Is ESG Underperforming In 2022? Taylor Tepper. Forbes Advisor.
Divesting fossil fuel stocks? That’s so last year. Merryn Somerset Webb. Financial Times. February 2022
(11) The Net Zero Transition and Offsetting of Carbon Intensity in Retail Investment Portfolios. Rupert Edwards. Forest Trends
(12) Griscom et al. 7 January 2020. National mitigation potential from natural climate solutions in the tropics
(13) https://leafcoalition.org/
(14) NCS Alliance Investment Accelerator

Achieving Deforestation Free Corporate Supply Chains Remains a Challenge

September 12, 2022 – Supply Change (SC), a non-profit initiative of Forest Trends, has published a two-part series explores corporate progress on their sustainability commitments and supply chain management since 2020. The latest publication, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020, offers a comprehensive evaluation of 125 leading consumer brands and retailers’ efforts to end commodity driven deforestation in the production or supply of forest-risk commodities including cattle, cocoa, palm oil, soy, timber, paper and pulp. 

About Supply Change: Forest Trends’ Supply Change Initiative draws from publicly available data to track a global set of companies, representing all levels of the supply chain from producers to retailers, and their commitments to address commodity-driven deforestation. SC compiles all research in a sophisticated database management system of over 900 companies that enables the generation of insights within cattle, cocoa, palm oil, soy, timber, paper and pulp supply chains. 

Over the next five years (2022–2027), SC will publish corporate and investor-tailored reports annually, summarizing key trends in the commitments, implementation and impacts of companies’ sustainable commodity commitments. They will identify trends in corporate sustainability commitments within key forest-risk supply chains that are emerging post-2020 and in addition to providing this “state of corporate deforestation commitments”, they will offer actionable information to enhance sustainable practices in corporate portfolios and mitigate potential reputational, operational, and market risks. 

Part one focused on corporate commitments and policies. In Part 1, Corporate Progress on No Deforestation and “Nature Positive” Post 2020, SC found that most companies had time-bound commitments to reduce forest loss, but many did not have sufficient systems to implement their commitments, including comprehensive risk assessment processes and greenhouse gas (GHG) emissions measurement and mitigation strategies that included Scope 3 emissions.  

Despite maintaining a commitment for at least one forest-risk commodity, many commitments did not cover companies’ entire supply chains, and SC noted recurring issues with commodity coverage and the level of detail provided by companies. Overall, SC found that companies are working to understand and minimize the impacts of their commodity production and sourcing, but many are still falling short on key facets of sustainability reporting. 

Part two focuses on implementation, impacts and progress towards achieving commitments. In the second part of this two-part series, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020,  SC builds on its previous findings to assess trends in the approaches used by companies to implement and disclose progress on their commitments. Trends discussed include companies’ approaches to monitoring, traceability, risk management, supplier engagement, progress reporting, and GHG emissions reporting. This report also highlights the implications of these trends and where there are opportunities for investors to encourage companies in their portfolios to adopt best practices for effective implementation and reporting.   

Above all, this reporting demonstrates that urgent action is needed to overcome persistent barriers to drive progress in fulfilling corporate sustainability commitments in forest-risk supply chains. Both companies and investors will have a pivotal role in the next five years in driving transformational change towards eliminating commodity-driven deforestation, reducing greenhouse gas emissions, and protecting human rights throughout their supply chains. 

For more information, please contact [email protected] 

Protecting One of the World’s Most Distinctive and Valuable Forests

10 August 2022 | Blue carbon and its many benefits are popular topics in discussions about how to address climate change. Many types of blue carbon projects hold tremendous potential for sequestering carbon and protecting their ecosystems, but they are not yet established, which has opened some debate about how impactful blue carbon can be in sequestering greenhouse gases at the scale we need.

There is, however, one type of blue carbon offset project that can be accurately, reliably and transparently measured in terms of emissions reductions. And it is critical for supporting local ecosystems and communities. It’s mangrove forests. This summer the Climate Action Reserve registered the first-ever mangrove forest project in Mexico, marking a significant milestone in demonstrating the impact and feasibility of this type of project.

To understand what this offset project type is and the value it brings, let’s look at the basics.

Mangrove forests are unique and distinct. They are found around tropical and subtropical shorelines and thrive in those salty waters, where other trees cannot survive. Their thick prop roots are twisted and complex, making them appear to stand above the water. Their roots also slow down water flow and allow sediment to collect. Because of these characteristics, mangrove forests are natural protectors and providers. They stabilize coastlines, reduce erosion and provide critical habitat for organisms.

Mangrove forests are critical to addressing climate change because they are excellent at storing carbon. In fact, mangrove forests are among the most carbon-dense ecosystems and can sequester four times more carbon than rainforests. Much of the carbon is stored in the soil collected beneath the mangrove trees.

Additionally, mangrove forests are critical for protecting against the current impacts of climate change by stabilizing coastlines and reducing erosion from storms, currents and tides.

Unfortunately, numerous issues are facing the world’s critical mangrove forests. The American Museum of Natural History (AMNH) describes mangroves as “among the most threatened habitats in the world.” Less than 50 percent of the world’s mangrove forests were intact at the end of the 20th century, and of those that remain, half are in poor condition.

Forces threatening mangrove forests include:

  • The conversion of wetland areas to artificial ponds by the aquaculture industry. Water is diverted away from the mangrove forests and waters are contaminated by chemicals, antibiotics and organic waste.
  • The conversion and destruction of mangrove forests for agricultural use.
  • The displacement of and damage to mangrove forests for coastal development of ports, docks, buildings, golf courses and marinas.
  • The logging of mangrove forests by charcoal and lumber industries.
  • Extreme weather, warmer air and water temperatures, increasing variability and intensity of rainfall, ocean salinity and other impacts caused by climate change.
  • Irresponsible tourism.

The Climate Action Reserve is working to protect and restore these unique ecosystems. The organization recently registered the first-ever mangrove forest offset project in Mexico. The Manglares San Crisanto/San Crisanto Mangroves project, which was registered under the Reserve’s Mexico Forest Protocol v1.5, is the first of its kind in Mexico. It includes three reporting periods, and an estimated 47,908 tonnes CO2 have been removed by the project.

The Reserve’s Mexico Forest Protocol encourages the protection, improved management and restoration of mangrove forests through the issuance of offset credits for additional emissions sequestration activities above the baseline. Communities following the protocol receive economic incentives and resources to ensure that these coastal ecosystems provide greater benefits for surrounding communities and biodiversity, build greater resilience to the impacts of climate change and store more carbon to benefit the global climate.

As the first project of its kind in Mexico and also the first mangrove project registered with the Reserve, the San Crisanto Mangroves project is pioneering and demonstrates the ability of mangrove forests to become viable offset projects and support local communities.

For the San Crisanto community, the mangrove forest is central to the ejido (land managed communally) and the community members’ way of life, which is deeply connected to the mangroves through fishing, coconut plantation, salt production, protection of native animals and sustainable tourism. Prior to developing the project, the community had lost water flow to the mangrove forest, which resulted in the loss of fish, birds and biodiversity and the area was immensely deteriorated. While developing the project, the community recognized the importance of the mangrove forest to their existence. Their offset project provides them with continuity to their way of life.

According to Jose Ines Loria Palma, President of Fundación San Crisanto, the San Crisanto Mangroves project taught the community many lessons, including:

  • You have to take a proactive attitude towards life, not wait
  • You must have a very long-term sustainable development project
  • It is very important to learn and teach to respect nature
  • Capacity development is a very important success factor
  • Carbon and biodiversity are not merchandise; what is paid for is the preservation of life

ACR Updates Program Rules for Tokenization of Carbon Credits

August 11, 2022.   This  article was originally published on americancarbonregistry.org

LITTLE ROCK, Ark., May 30, 2022 – The American Carbon Registry (ACR), a nonprofit enterprise of Winrock International, has announced updated program rules, effective immediately, that prohibit the tokenization of ACR carbon offset credits unless explicitly authorized by ACR. The updated rules, detailed in the legal Terms of Use agreement with ACR account holders, are designed to protect carbon asset integrity, including by ensuring that ACR-issued credits are not double sold or used by more than one entity to make environmental claims.

Concerns about blockchain’s role in the carbon markets has been amplified in the recent months amid the swift emergence of a crypto carbon market, in which millions of carbon credits have been retired, tokenized and converted to cryptocurrencies.

“Over the course of the last year, we have been in discussions with a number of companies interested in utilizing a range of technologies to streamline the credit creation process as well as to create digital carbon assets such as tokens and carbon-backed cryptocurrencies. While interested in the opportunities that these and other digital technologies offer to create efficiencies in carbon measurement, monitoring, reporting and verification, and to democratize access to markets, we are committed to a rigorous assessment process to ensure that they don’t undermine the foundations of carbon market integrity,” said Mary Grady, the Executive Director of ACR.

“As things stand at the moment, we believe the new link between carbon markets and unregulated cryptocurrencies presents a reputational vulnerability that could jeopardize confidence in carbon markets at precisely the time we need scale and transparency for markets to help achieve Paris Agreement climate targets,” Grady added.

ACR’s newly announced rules are the first step in the development of a set of program guardrails to protect market integrity. Alongside its own efforts to understand the risks and opportunities, as well as what rules would need to be in place for the creation of digital carbon assets, ACR has participated in the International Emissions Trading Association (IETA) Council Task Group on Integrity in Digital Climate Markets, launched earlier this year, which seeks to ensure sound foundations for the integration of carbon markets with digital technologies. The task group has already issued a set of principles to ensure integrity in digital carbon market offerings.

Over the coming months, ACR will build on the IETA principles and collaborate with carbon market participants with the aim of establishing a common implementation roadmap to safeguard the structural, legal and environmental underpinnings of carbon markets, while optimizing climate impact and access to finance. This will include program rules to authorize the tokenization of credits; developing the required registry infrastructure to ensure transparency and avoid double selling and double claims; and the implementation of appropriate legal and regulatory considerations along the carbon value chain.

A ban on exporting carbon credits and its impact on the domestic carbon market

10 August 2022 | With the passage of the Energy Conservation (Amendment) Bill, 2022, the domestic carbon market is becoming a reality. However, this also brings in many question marks. The statement from the Hon’ble minister regarding restrictions on the export of carbon credits will be the major focal point in the planned launch of India’s carbon market.

There are few of the areas we must need to look into i.e, first as the Energy Conservation (Amendment) Bill, 2022 intends to bring in the energy segment under the carbon market, it appears that the export ban of carbon credit may be immediately impacting the credits generated from the renewable energy sector; many of which are of low-hanging fruits. Projects under the renewable energy segment, including wind and solar, may cease generating any carbon credits post-2020. The authority may propose a new framework which will make many of the existing low-hanging RE projects ineligible under the domestic carbon market. If permitted, it will immensely impact the sustainability of credits from PAT and REC, considering the current ambition of integrating PAT and REC under a new carbon market framework. Today in India, the demand for carbon credit from the voluntary market segment is very limited, and any policy flexibility of allowing low-hanging carbon credits at par withPAT and REC under the existing market segment; will pull the price of REC and ESCerts (Energy Saving Certificates) down. Thus, the policy framework should need to distinguish the credits from the different segments and create a pathway to integrate all the credits with a timeline of 5 to 10 years. Unless the proposed future carbon market framework is not flexible in accommodating voluntary carbon market standards, many projects under the voluntary carbon market standard will cease to exist. Thus, a significant testing phase will happen during the next few months to test the market’s fair, credibility and sustainability.

The second is on credits generated from forestry, waste management and transport sectors. Although the proposed bill limits renewable energy and energy efficiency sectors , it is clear that other sectors may need to pass through the same test of export ban considering India’s updated NDC targets reduction of emissions intensity of GDP by 45 per cent by 2030, compared to 2005 levels. These issues will be assessed during the next few months under the corresponding adjustment. The testing phase is how these sectors will be accommodated in the new future and under what provision.

The third point is what will be defined as a carbon credit in the context of India. As per the bill, “carbon credit certificate” means the certificate issued by the Central Government or any agency authorised by it under section 14AA. With the emergence of many voluntary carbon market standards and players and overnight new players declaring a new standard/platform/registry, it will be a critical phase to redraw the eligibility criteria for defining carbon credit certificates. The carbon market has failed due to credibility issues despite its novel intention, and thus the foundation of India’s carbon market has to be based on credible carbon credits. With Article 6.4 becoming the front runner in kick-starting the carbon market under Paris Agreement in the near future, and many of the CDM components may be the choice during this transition, India’s carbon market framework will also closely follow the safest pathway in following the multilateral framework and guideline aligning with A6.4.

The final point is that the message on the export ban of carbon credits may not have been intended for sectors where large investment is needed through carbon financing. However, the generalisation of the export ban statement in its spirit may hamper India’s current stature as one of the preferred investment destinations for the realisation of quality carbon credits. With billions of Dollars of investment commitment to qualitative and impact carbon (where government incentives are hardly present), the government should try to bring much clarity to these sectors. Today there is immense demand for community-led and nature-based solutions where the private sector and communities with investment from impact funds aim to reduce tremendous greenhouse gas emissions. Many of these sectors, such as cookstove or soil carbon in the agriculture sector, are immensely thriving and changing the rural landscape and ecosystems. Although the current bill doesn’t have any provision to limit the existence of carbon credits, there is an immense threat if we should not bring in a very detailed and consistent policy framework during the course work of the drafting of the carbon market framework. And we should not generalise the carbon credits for each sector as one. We must note that there is not much demand in India for quality carbon credits considering small players who will offset their carbon emissions. Thus, we should facilitate a supportive policy framework in the sectors where government intervention and engagements are minimal, which will help large investment flow for mitigating GHG emissions from these sectors.

VCM Reaches Towards $2 Billion in 2021:
New Market Analysis Published from Ecosystem Marketplace

03 August 2022 | 2021 was a historic, record-breaking year for the Voluntary Carbon Markets, and 2022 is off to a fast-paced start. With the VCM now around the $2 billion mark, this much-anticipated The State of the Voluntary Carbon Markets 2022 Q3 briefing, “The Art of Integrity.” 

The briefing offers a synthesis of EM’s wealth of all EM Respondent reported VCM carbon credit trade data for 2021 (and updates to 2020), a 6X increase in annual market data over 2019.

The VCM grew in value towards $2 Billion in 2021. This quadrupling in market value from 2020, and doubling from our last market update during COP26, was driven by an acceleration of nature-based solutions trading volume and higher prices for these and other projects with non-carbon environmental and social benefits, such as clean cookstoves and water purification devices.

From developers to investors and buyers, VCM data interests are becoming increasingly granular. Over the past several months, EM has been busy investing in upgrades to its data systems and analytical tools, applying new QAQC practices to the data, and updating its project typology and category classifications to capture the astonishing diversity of +170 project credit types from nearly 100 countries reported to us for transactions in 2020-2021.

“Quality” and “integrity” are buzzwords in the voluntary carbon markets right now. Our position has always been that transparency is fundamental for high-quality, high-integrity markets. As the markets get larger and more complex, our goal is to make sure that markets deliver real climate impact, that high-quality projects are priced and valued accordingly, and that corporate climate action actors understand their full range of options.

EM’s work is accelerating, and collaboration is essential. With new initiatives, such as the ICVCM and VCMI offering integrity guidance and principles, and the overall bullish outlook of the VCM creating the wind at our backs, EM humbly leans into its increasingly critical role as a neutral and independent nonprofit initiative driving end-to-end trade transparency in what is still a largely disaggregated, over the counter market.

We look forward to working with our growing global network of EM Respondents, Visionary Partners, Strategic Supporters, Data Partners, and new collaborators to continue to expand and strengthen our coverage of credit sales from project developers and intermediaries.

Stay tuned for our next State of the VCM briefing as EM Respondents are currently reporting 2022 data. More up-to-date, in-depth, and cross-cutting data to be published in September during Climate Week NYC.

The Integrity Council for the Voluntary Carbon Market Launches its Public Consultation for Core Carbon Principles

27 July 2022 | It’s official. The Integrity Council for the Voluntary Carbon Market (ICVCM), which encompasses deep and varied expertise from across the voluntary carbon market ecosystem including world-leading scientific, financial, practitioner, NGO, policy, indigenous, local and other forms of knowledge, has today announced the start of the public consultation for the draft Core Carbon Principles, Assessment Framework and Assessment Procedure.

What is the consultation for and how long do you have to provide feedback?

The aim of the core carbon principles are to set a definitive and consistent benchmark for credible, high-integrity carbon credits. With a deadline of 27 September 2022, it’s a 60-day public consultation on its draft Core Carbon Principles (CCPs), Assessment Framework and Assessment Procedure.

The draft Assessment Procedure sets out a proposed process for assessing CCP-eligibility, how eligible carbon credits will be tagged; how the Integrity Council will continue to oversee and enforce the CCPs; and facilitate the continual development of the voluntary carbon market.

Learn more about how to get involved on the ICVCM’s website: https://icvcm.org/public-consultation/

Public Briefing Sessions

The ICVCM will be sharing more details on the consultation period, CCPS, and Assessment Framework during these public briefing sessions. Hear from Annette Nazareth, former SEC Commissioner and Chair of the ICVCM Governing Board, as well as a selection of other fantastic speakers.

Session 1: Wednesday 27th July 14:00 – 14:45 (BST): Register for the briefing on the 27th July

Session 2: Tuesday 2nd August 14:00 – 14:45 (BST): Register for the briefing on the 2nd August

This is a developing article. More content will be added over the course of the day and coming days.

Announcing FSC and Ecosystem Marketplace collaboration

Ecosystem Marketplace has recently signed a three-year agreement with Forest Stewardship Council (FSCGD GmbH) to collaborate and develop shared insights regarding carbon markets and non-carbon benefits as they pertain to FSC certified forests.  For more than 25 years FSC has pioneered forest certification and promoted responsible management of the world’s forests. Through this collaboration FSC seeks to connect FSC-certified forest managers with new markets, help project managers market FSC benefits and enable carbon markets to drive value to FSC certified forests.  Ecosystem Marketplace has tracked global carbon market transactions and associated benefits “beyond carbon” for more than 16 years.  Transaction attributes that EM tracks include co-benefit standards such as Climate, Community and Biodiversity (CCB) and project assessments of Sustainable Development Goals.

The shared workplan includes publishing a brief discussion paper focusing on non-carbon benefits of forest carbon projects and the overlap with FSC certified forests.  Research will pull from carbon markets data that EM collects, FSC certified projects, public data sets such as international carbon standard registries, and structured interviews with forestry project managers. The work will begin by cross mapping FSC certified forests with carbon market data that EM has compiled for forestry projects, specifically Improved Forestry Management projects, in order to identify the subset of forestry projects on which the analysis will focus.

The first discussion paper will be published pre-COP27 in Egypt in November and accompanied by a webinar presentation.  EM and FSC also hope to collaborate on side events focused on land use and the voluntary carbon market at the Forestry Pavilion at COP27.

If interested, or to learn more  about this collaboration, contact [email protected] or [email protected]

Brazil and the carbon markets

This article first appeared on Biofilica

15 June 2022 | A new Federal decree puts Brazil on route to capture an important share of the voluntary carbon market that is expected to grow at least tenfold by 2030¹ and helps to understand the executive branch’s strategy of what may turn out to be a Brazilian ETS².


In a pompous event held at the Botanical Garden in Rio de Janeiro and attended by the President, his Ministers of Economy, Environment, Foreign Affairs, Mines and Energy, with the presidents of the Central Bank, Bank of Brazil, Petrobrás, as well as dozens of CEOs and entrepreneurs of companies linked to the energy sectors, agriculture and environmental markets, the Federal Government announced a series of measures to increase Brazilian competitiveness in businesses related to decarbonization and so-called Green Investments. Undoubtedly, the most important was Decree 11,075, which established procedures for sectoral agreements for greenhouse gas (GHG) mitigation, in addition to establishing the National System for Reducing Greenhouse Gas Emissions, entitled SINARE.


A 13-year long journey

The legal basis of the decree dates back to 2009, when the National Climate Change Policy (PNMC, in Portuguese) was established by law. It is in the PNMC that the idea of sectoral agreements for GHG mitigation originates, targeting, for example, the energy, agriculture and transport sectors; it also introduced the concept of the Brazilian Market for Emission Reduction, a green and yellow ETS.

Unfortunately, after 13 years of the PNMC, we have not yet established sectoral plans and it was only until recently that we begun to see significant advances in the business environment for the development of voluntary carbon markets in Brazil, with the establishment of the Forest + Carbon Program (2020), and the National Payment Policy for Environmental Services (law 14,119) of 2021.

This pro-market direction is essential for Brazil to capture a share consistent with our competitive advantages, bringing here, via carbon markets, a necessary financing for a decarbonization route, especially in activities related to land use such as within agriculture and forest management.

This decree is only the long-awaited kick-start, as there is still a long regulatory path to address complex technical issues and legal gaps that still need to be clarified, such as the legal nature of the carbon credits, and adopted, such as the Socio-Environmental Safeguards for registration in the SINARE. Some market analysts and lawyers linked to the topic suggest that some of these gaps should be filled in the form of law, currently debated in Congress under law proposal 528/21³. Such complementary initiatives should be followed in parallel with other pricing mechanisms established by law, a fact widely recognized in Article 6 the Paris Agreement.

In any case, it is evident that the political signal of the path chosen by Brazil in relation to the financing of activities related to decarbonization, is one of more markets and less taxes. This approach is also in line with the recently published World Bank carbon pricing report, which shows that worldwide in 2021, the collected total via a carbon market was around US$ 56 billion, while in tax regimes the amount stood at US$ 28 billion. Emphasizing that in the case of markets, this is only the value of primary transactions (purchase of allowances4 + first sale in the voluntary market), that is, it does not include the secondary market that is estimated to be in the magnitude of US$ 754 billion.


What does the voluntary market have to do with all this?

The voluntary carbon market serves to increase the climate ambition of various actors, such as companies committed to Net Zero paths, while financing activities that are not yet financially viable, such as forest restoration and conservation. Numerous market analyses and reports5 indicate a growth between 15 and 20 times in the next 10 years. McKinsey estimates a market value of around $50 billion by 2030. Last year alone, more than 110 GHG sequestration and reduction initiatives funded by this market were launched only in  Verra’s Verified Carbon Standard (VCS).

Seeking a slice of this global funding cake is the obligation of any government that is seriously committed to sustainable development in Brazil. In this sense, instituting SINARE, observed by the need to define Social and Environmental Safeguards, represents a major advance and deserves to be celebrated. This mechanism has been a longstanding demand by project developers, including Biofílica. The expectation is that this central and digital registry will serve as a kind of “filter”, allowing only the registration of high integrity, socio-environmentally sound programs and projects, with real climatic benefits. This only strengthens the quality of “Made in Brazil” credits and makes us even more competitive to receive financing via carbon markets. Export.

It is also possible to imagine that within a five-year horizon, credits registered within the SINARE can access demand from regulated companies in Brazil that will need to achieve their sectoral goals. Domestic sale.



Portuguese version see below:

Decreto do Governo Federal coloca o Brasil na rota de capturar uma importante fatia do mercado voluntário de carbono que deve crescer pelo menos dez vezes até 2030¹ e ajuda a entender a estratégia do executivo do que pode vir a ser um ETS² Brasileiro.


Em um evento pomposo realizado no Jardim Botânico do Rio de Janeiro e que contou com a presença do presidente da República, seus ministros da Economia, Meio Ambiente, Relações Exteriores, Minas e Energia, com os presidentes do Banco Central, do Banco do Brasil, da Petrobrás, além de dezenas de CEOs e Empreendedores de empresas ligadas aos setores de energia, agropecuária e mercados ambientais, o Governo Federal anunciou uma série de medidas para aumentar a competitividade brasileira em negócios ligados à Descarbonização e aos chamados Investimentos Verdes. Sem dúvida, o mais importante foi o decreto 11.075 que estabelece procedimentos para acordos setoriais de mitigação de Gases de Efeito Estufa (GEE), além de instituir o Sistema Nacional de Redução de Emissões de Gases de Efeito Estufa, intitulado de SINARE.


13 anos de trajetória

A base jurídica do decreto é de 2009, quando foi estabelecida por lei a Política Nacional de Mudança do Clima (PNMC). É na PNMC que surge a ideia dos acordos setoriais para mitigação de GEE, incluindo por exemplo os setores de energia, de agricultura e transporte; além de introduzir o conceito do Mercado Brasileiro de Redução de Emissões, o ETS verde e amarelo.

Infelizmente já passados 13 anos da PNMC ainda não temos estabelecido os planos setoriais e muito recentemente começamos a ver avanços expressivos nas condições de negócios (“business environment”) para o desenvolvimento dos mercados voluntários de carbono no país, com o estabelecimento do Programa Floresta+ Carbono (2020), e da Política Nacional de Pagamento por Serviços Ambientais (lei 14.119) de 2021.

Esse direcionamento pró mercado é essencial para que o Brasil possa capturar uma fatia condizente com nossas vantagens competitivas, trazendo para cá, via mercados de carbono, financiamento mais do que necessário para uma rota de descarbonização, principalmente em atividades ligadas ao uso da terra como agropecuária e florestas.

Esse decreto é apenas o tão esperado pontapé inicial, afinal resta ainda um longo caminho regulatório para endereçar questões técnicas complexas e lacunas jurídicas que ainda precisam ser esclarecidas, como da própria natureza jurídica dos créditos, e adotadas, como por exemplo as Salvaguardas Socioambientais para registro no SINARE. Alguns analistas de mercado e advogados ligados ao tema sugerem que parte dessas lacunas deveriam ser preenchidas em formato de Lei, hoje debatidas no Congresso sob o PL 528/213.Iniciativas complementares que devem seguir em paralelo a outros mecanismos de precificação estabelecidos por Lei, fato amplamente reconhecido no artigo 6 do Acordo de Paris.

De qualquer maneira fica evidente a sinalização política do caminho escolhido pelo país em relação ao financiamento de atividades ligadas à descarbonização, mais mercados e menos impostos. Muito em linha com o recém-publicado relatório do Banco Mundial sobre Precificação de Carbono, que mostra que mundialmente em 2021 o total arrecadado via mercado de carbono foi da ordem de US$ 56 bi, enquanto nos regimes de impostos (tax) o valor ficou em US$ 28 bi. Enfatizando que no caso dos mercados, esse é apenas o valor das transações primárias (compra de allowances4+ primeira venda no Voluntário), ou seja, não inclui o mercado secundário que pode ser na ordem de US$ 754 bi.


E o mercado voluntário com isso?

O mercado voluntário de carbono serve para aumentar a ambição climática de diversos atores, como empresas comprometidas com o Net Zero, e ao mesmo tempo financiar atividades ainda sem viabilidade financeira, como restauração e conservação florestal. Inúmeras análises e reportes de mercado5 indicam um crescimento entre 15 à 20 vezes nos próximos 10 anos. A Mckinsey estima um valor de mercado da ordem de US$ 50 bi em 2030. Só no ano passado, foram lançadas mais de 110 iniciativas de sequestro e redução de GEE financiadas por esse mercado somente no padrão Verified Carbon Standard (VCS) do Verra.

Buscar uma fatia desse bolo global de financiamento é obrigação de qualquer governo comprometido seriamente com o desenvolvimento sustentável no Brasil. Nesse sentido, a instituição do SINARE, observada à necessidade da definição de Salvaguardas Socioambientais, é um grande avanço, pleito antigo das empresas desenvolvedoras de projetos como a Biofílica, e merece ser celebrado. A expectativa é que essa central única e digital sirva como uma espécie de “filtro”, permitindo somente o registro de programas e projetos socioambientalmente íntegros, com benefícios climáticos reais. Isso só fortalece os créditos “Made in Brazil” e nos deixa ainda mais competitivos para receber financiamento via mercados de carbono. Exportação.

É também possível imaginar que em um horizonte de cinco anos os créditos registrados dentro do Sinare possam acessar demanda de empresas reguladas no Brasil que precisarão atingir suas metas setoriais. Venda doméstica.